Contributions to Federal Election Campaigns by Government Contractors

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We develop a theoretical model which determines whether or not a firm sponsors a Political Action Committee (PAC) and, if it does, the quantity of funds that the PAC will disburse. The firm is assumed to face supply and demand schedules for PAC receipts, whose positions depend on attributes of the firm such as firm size, government-sales intensity, and market structure. Two related equations derived from the theoretical model--a probit equation for PAC sponsorship and a disbursements equation--are estimated using pooled data on 226 government (primarily defense) contracting firms during the 1979-80 and 1981-82 election cycles.