Indirect Bribing with Plausible Deniability

From a new working paper by Stefano Della Vigna, Ruben Durante, Brian Knight, and Eliana La Ferrara

We examine the evolution of advertising spending by firms over the period 1994 to 2009, during which Silvio Berlusconi was prime minister on and off three times, while maintaining control of Italy’s major private television network, Mediaset. We predict that firms attempting to curry favor with the government shift their advertising budget towards Berlusconi’s channels when Berlusconi is in power. Indeed, we document a significant pro-Mediaset bias in the allocation of advertising spending during Berlusconi’s political tenure. This pattern is especially pronounced for companies operating in more regulated sectors…

In the United States, Lyndon Johnson made his fortune, working through Lady Bird, in similar ways. As Robert Caro wrote in Means of Ascent:

As one businessman puts it: “Everyone knew that a good way to get Lyndon to help you with government contracts was to advertise over his radio station.”

Jack Shafer, drawing on Caro, summarizes the details in The Honest Graft of Lady Bird Johnson.

Hat tip: John van Reenen.