Earmarks: “driver of legislature” or a “gateway to corruption”?
Friday, 13 February, 2015

On February 11th, ISET hosted Olivier Harlem, Ph.D. of the Erasmus School of Economics, Rotterdam. Dr. Harlem presented his job market paper, “Earmarks”. Earmarks were U.S. federal funds that are designated for local projects and were easy for local representatives to obtain for their electoral districts. Some of the reasons why earmarks are interesting are that they are seen as: (i)”[a] symbol of broken spending”, (ii)”[a] gateway to corruption” and (iii) a “political carrot for speeding up [the] legislative process”. From an academic point of view, studying earmarks is interesting, as they reflect the aspects of both politicians’ behavior and the impact of public funds on the electoral process.

Dr. Harlem used specifications from Grossman and Helpman’s model to build the essence of his empirical approach.

Furthermore, he used data on earmarks, legislative results of both houses, and election results. His empirical approach was a configuration of the Difference in Difference (DiD) technique, which he used to compare two periods 2007-2008 and 2009-2010. Earmarks were abolished in 2010, making it possible for Dr. Harlem to compare control and treatment groups in two periods.

Results of the study show that representatives who received more earmarks deviated from the party line more after they were abolished. Furthermore, the inability to receive earmarks had a stronger effect on more important votes. Lastly, after earmarks were abolished representatives started spending more on their electoral campaign.

ISET would like to thank Dr. Harlem for an interesting presentation.