Which came first, laws or lobbyists? : an empirical investigation of environmental regulation and interest group formation

Abstract

Nonprofit organizations and interest groups play a substantial role in the United States; there were over 260,000 nonprofits and nearly 5,000 political action committees at work in 2010. Conventional wisdom suggests that many of these groups have formed with the goal of influencing the passage of new legislation that is favorable to their interests. This thesis contributes to our understanding of interest groups by providing evidence of the opposite direction of causation within the context of environmental legislation. I develop a theory for why new environmental regulations cause new environmental interest groups to form, rather than vice versa. I test the theory with a novel panel data set of federal and state environmental laws and of the formation dates of wildlife, pollution, and conservation oriented interest groups since 1950. My empirical tests combine differences-in-differences (and differences-in-differences-in differences) estimators with event study methods. The results at the national level show that more groups formed during a window of time before and after the passage of the Clean Air and Endangered Species Act. The results at the state level, which are in many ways more credible estimates, show that state-level interests groups were more likely to form during a window after new legislation was passed than before. Overall, the results suggest laws that leave a large portion of decision making to a bureaucracy create new lobbyists. This is a result that has been suggested by some environmentalists and economists but never empirically tested before this thesis.