Campaign Contributions by Non‐profit Executives and Government Grants
| Date | 01 August 2020 |
| DOI | http://doi.org/10.1111/obes.12341 |
| Published date | 01 August 2020 |
| Author | Christian Cox |
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©2019 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd.
OXFORD BULLETIN OF ECONOMICSAND STATISTICS, 82, 4 (2020) 0305–9049
doi: 10.1111/obes.12341
Campaign Contributions by Non-profit Executives
and Government Grants*
Christian Cox
Department of Economics, Michigan State University, East Lansing, USA
(e-mail: coxchri8@msu.edu)
Abstract
United States election candidates seek monetary support for their campaigns and many
individuals oblige. Non-profit organizations are limited in their political spending, but
their executives, in a personal capacity, are not.This paper investigates whether individual
campaign contributions are a political workaround for non-profits. I pair non-profit tax
filings and Federal Election Commission records to form the first large-scale panel linking
non-profit executive contributions and non-profit financials. My analysis covers the 1998,
2000 and 2002 elections for 29,682 non-profit organizations. I estimate a series of models
and find an economically significant, robust and positive relationship.
I. Introduction
Government grants are a major source of revenue for many non-profit organizations.Ac-
cording to the Pettijohn (2013), one-third of all revenue for 501(c)(3) publiccharities came
from grants and contracts, totaling $137 billion in 2012. Non-profits may try to alter the
grant awarding process through political means, but this is complicated for 501(c)(3) char-
itable organizations as they are prohibited from making significant political contributions
as an organization. Political activity by the non-profit may then be driven by non-profit
executives through individual campaign contributions.
Articles that analyse the effect of contributions on government decisions (Tripathi,
2000; Lopez, 2001; Rocca and Gordon, 2013; Boas, Hidalgo and Richardson, 2014) do
not consider individual contributions, non-profits, nor grants. The articles that look at con-
tributions by executives(Fremeth, Richter and Schaufele, 2013; Powelland Grimmer, 2016)
concentrate on corporations and non-grant outcomes. Evidence in the literature is mixed,
however the question is still open over grants, non-profits, and executive contributions.1
JEL Classification numbers: D72, H81, L31, M12.
*Ithank the editor Brian Bell, the anonymous reviewer, CarlyUrban, Stacy Dickert-Conlin, Jon X. Eguia, Christiana
Stoddard and TimothyFitzgerald.
1de Figueiredo and Silverman (2006) look at lobbying by universitiesand the effect on earmarks. Some study the
political connections of corporate boards (Goldman, Rocholl and So, 2013; Wang, 2014). Hertel-Fernandez (2017)
shows that employersare conduits through which employees engage in political activities.
Contributions and grants 917
This leads to the paper’s central question: Do individual campaign contributions by
non-profit executives relate to government grant allocation? To answer this, I construct a
novel data set by combining non-profit financial tax filings with campaign contributions
records. I exploit the panel structure and large non-profit covariate set to estimate a series
of models that control for non-profit heterogeneity and election factors that may influence
grants and contributions. Results indicate a positive relationship between contributions
and grants. I find that a 10% increase in contributions corresponds to a 0.2% increase in
government grants, which is a substantial relationship as averagetotal g rants are 660 times
larger than average total contributions for each non-profit.
The paper proceeds as follows. Section II details the theoretical predictions. Section
III describes the data. Section IV contains the empirical analysis. Section V discusses the
limitations of the findings and concludes the paper.
II. Theory and background
The mechanisms through which campaign contributions net the non-profit more or larger
grants are nebulous as there are two institutions involved, namelyCong ress and grant award-
ing agencies.2Contributions may buy the non-profit influence with a Member of Congress
who unofficially intervenes on their behalf to aid their chances of winning a grant.3
Hypothesis 1 Contributions are influential and thus non-profit executives strategically
contribute to Congressmen to aid them in getting grants.
This hypothesis is motivated by the legal restrictions on non-profit political activity,
which may lead non-profit executives to use individual contributions. As non-profit em-
ployees are allowed to participate in political campaigns provided they do it as a private
citizen and not as an agent for the non-profit, individual contributions may be an ideal place
for monetary influence. A positive effect of contributions on grants is consistent with this
hypothesis.4
Differentiating between the contribution made at the behest of the firm and one made
for personal reasons is difficult, but the investor motivation (Snyder, 1992) is plausible in
this context. First, there may be significant incentives for non-profit executives to produce
results to induce support from their boards. Second, if these executives have influence over
their compensation, they may finance political contributions with these funds. For budget
or service maximizing executives, this could be rational for the non-profit to undertake if
the return is substantial (Steinberg, 1986; James and Rose-Ackerman, 1986).
Campante (2011) argues that contributions are not politically influential and rather a
form of political participation. The reasoning is that only in the aggregate do contributions
matter, and individuals are aware of their insignificance. A null result is also possible
even if contributions have influence. Some managers are not informed and do not exploit
2Congressmen set federal agency funding levels and perform casework for their constituents; Congressional
responses to constituent requests are highly regulated. Congressmen may have soft influence over local and state
grant awarding agencies.
3The Member of Congress may also direct more funds to agencies that will likely awardthat non-profit g rants.
4When the compensation is salary driven, executivescontribute less than those with compensation tied to political
risk (Gordon, Hafer and Landa, 2007). In the case of non-profits, executive compensation on paper is often salary
based but incentive structures do exist (Grasse, Davis and Ihrke, 2014).
©2019 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd
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