Public Choice

, Volume 155, Issue 3–4, pp 211–228 | Cite as

Bailout for sale? The vote to save Wall Street

  • Michael DorschEmail author


This paper provides a public choice analysis of the 2008 banking bailout in the United States. The paper introduces heterogeneity of congressional districts into the common agency problem in special interest politics. District heterogeneity implies district-specific electoral constraints on legislators’ ability to collect rents from, and cast dissonant votes in support of, special interests. An empirical analysis examines legislative voting on the initial bailout proposal, using campaign contributions to legislators from special interest groups and the importance of financial services for employment within congressional districts as the main explanatory variables. The empirical analysis corrects for possible endogeneity bias, using valid instruments, and considers several intuitive sub-sample estimations as alternative methods for addressing the endogeneity issue. The paper provides empirical evidence that campaign contributions from the financial services sector influenced legislative voting on the banking bailout.


Campaign finance Legislative voting Political agency Special interest politics 



I am grateful for the suggestions of Marcus Casey, Karl Dunz, Fergal McCann, and seminar participants at the American University of Paris (October 2009), the Paris School of Economics—Campus Jourdan (November 2009), the Prague Conference on Political Economy (March 2010), the Spring Meeting of Young Economists (April 2010), and le Centre d’économie de la Sorbonne at Université Paris 1 (May 2010). I also thank Jason Moyer-Lee and Hayal Saeed for their excellent research assistance. The rigorous comments of two anonymous referees and the editor have substantially improved this paper. Remaining errors are, of course, my own.


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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.The American University of ParisParisFrance

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