Corporate Political Connections and Favorable Environmental Regulatory Enforcement.

This article investigates whether the U.S. Environmental Protection Agency (EPA) enforces the Clean Air Act (CAA) differently for politically connected firms compared to unconnected ones, using a regression discontinuity design focused on close federal elections. The study finds no significant difference in EPA investigations between the two groups but shows that politically connected firms face fewer penalties and lower fines, especially when connected to powerful politicians or firms important to those politicians by location, industry, or campaign contributions. Additionally, firms tend to donate more to politicians with weaker environmental commitments, and the favorable enforcement diminishes when political connections are lost. These findings provide systematic evidence that campaign contributions can indirectly benefit firms through reduced environmental regulatory enforcement and penalties.