Essays on Politics and Economics of Monetary Transfers

Abstract

This dissertation contains three essays that study monetary transfers.

The first chapter studies the effect of a politician's vote in the legislature on monetary contributions that the politician receives from interest groups after the vote. I first develop models to show that interest groups have an incentive to make monetary contributions to politicians not only before politicians vote but also after they vote. Then I find evidence that voting in favor of the Emergency Economic Stabilization Act (EESA) of 2008 has increased the amount of monetary contributions that the members of the U.S. House of Representatives receive from the interest groups in the financial sector after the passage of the EESA.

The second chapter studies the effect of a politician's ideological strength on monetary contributions that the politician receives from interest groups. If interest groups care mainly about current policy outcomes, they will make monetary contributions to ideologically neutral politicians who are often pivotal voters in the legislature. However, if interest groups care more about future policy outcomes, they have an incentive to make monetary contributions to politicians who share similar policy preferences, i.e. liberal (conservative) interest groups will make contributions to liberal (conservative, respectively) politicians, to help those politicians win the election and continue to serve in the legislature. I first develop a model incorporating these two opposing effects. Then I find evidence that ideologically neutral politicians receive more monetary contributions from interest groups. This result suggests that interest groups are primarily motivated by the short-run incentive.

The third chapter studies monetary transfers from parents to children. Unlike most other taxes, the estate tax is levied only on a very small number of very large estates. There is an exemption level of the tax below which there is no tax liability. This threshold divides taxpayers sharply into two groups: those who paid the estate tax when their parent passed away and those who did not. Using a regression discontinuity design, I find evidence that those who have experience of paying the estate tax at their parent's death are more actively engaged in estate tax avoidance behavior for their children.