The Economics of Political Donations

American corporate and political elites are connected by the donations that the latter receive from the former. Using a novel dataset, this thesis analyzes these connections as a social network. This analysis uncovers the allocation of such money among legislators and the changing structure of this network, and thus of the changing nature of money in US politics. In particular, beyond the well understood increase in the scale of donations, we document how donation patterns have become more polarized, more concentrated, and more dependent on the corporate connections and allegiances of the individual. We show that the last 35 years has seen a transition in the nature of political giving. A similar transition has taken place in terms of who receives the donations. Money is now much more targeted on a small number of key politicians. Moreover, power, as measured by standard network statistics has become much more concentrated. The distribution of donations becoming extremely skewed, dominated by a few `mega-donors', and giving almost exclusively along party lines. The dissertation then goes on to examine whether such ideological diversity when present in the boardroom affects firm performance. We find that whilst a board with a broader range of political opinions and beliefs is correlated with better performance ceteris paribus, that the causal impact of such an increase in diversity is negative and substantial.