Study Finds Giant State Business Subsidies Mostly Grow Lobbying Firms Near State Capitals

State governments love announcing big subsidy deals. A governor stands at a podium, names a company, names a number, and promises thousands of jobs. What rarely gets mentioned is who actually benefits first: the lobbyists who helped broker the deal.

A study published in the academic journal Small Business Economics examined hiring data from roughly 40,000 lobbying firms across all 50 states between 1997 and 2019. The authors, economists Russell S. Sobel of The Citadel, Gary A. Wagner of the University of Louisiana at Lafayette, and Peter T. Calcagno of the University of Charleston, compared lobbying employment trends against states that awarded unusually large economic development subsidies to single companies.

Their finding: after a state hands out its first "extraordinarily large" incentive, defined as a single subsidy roughly 3,500 times bigger than that state's historical median award, lobbying employment rises 3.6% statewide. In the county containing the state capital, it jumps 5%.

The authors tested different thresholds for what counts as "extraordinarily large," from 2,000 times the median award up to 5,000 times. The results held steady across the board. Bigger subsidy, bigger bump in capital-county lobbying jobs.

Existing firms hire more, but no new firms open

One detail in the study stands out. The lobbying job growth doesn't come from new firms entering the market. It comes from existing lobbying firms hiring more staff.

"No new lobbying firms emerge; existing firms simply hire more staff," the authors wrote, according to Reason. They argue this points to something specific: talent and effort shifting away from building new businesses and toward extracting favorable treatment from government, in economics jargon, "rent-seeking."

Lobbying firm employment concentration in capital counties rose 5.8%, even though the number of firms stayed flat, the study found. Fewer firms doing more of the state's lobbying work is a fairly concentrated industry to begin with. As the authors put it, "very few industries are so highly geographically concentrated as lobbying."

The broader context: do subsidies deliver?

This lobbying data builds on a broader argument Sobel made in 2024, cited in the same Reason report: that decades of research have failed to show these subsidy programs produce statistically significant gains in tax revenue, employment, economic growth, or personal income for the states that hand them out.

Defenders of subsidy deals, including many state economic development officials and the companies that receive them, argue that targeted incentives can and do land real plants, real payrolls, and real tax bases that wouldn't otherwise locate in a given state. Foxconn's now largely scaled-back Wisconsin deal and various semiconductor plant subsidies tied to the CHIPS Act are frequently cited as examples where large incentives were meant to lock in specific, verifiable investment. Whether those specific deals delivered on their job promises is itself disputed and worth examining case by case, not dismissed wholesale.

The study doesn't claim subsidies produce zero private-sector jobs. It actually acknowledges the opposite is sometimes true, noting that lobbying employment concentration increases even though "the lobbying industry is a small share of overall economic activity in capital counties." The point isn't that subsidies never create any private jobs. It's that a measurable and reliable job created by these deals is a lobbying job, clustered near the state capitol, and that's not what governors are promising on stage.

What remains unknown

The study doesn't name specific states, specific subsidy deals, or specific lobbying firms that benefited. That level of granular data wasn't part of the published findings referenced here. That's a real limitation. Taxpayers and state legislators who want to know exactly which firms grew and by how much, in which state, will need more detailed follow-up research or state-level lobbying registration data to get there.

What the study does establish, using a 22-year dataset across all 50 states, is a consistent statistical pattern: extraordinarily large subsidies correlate with lobbying employment growth concentrated in capital counties, and that growth comes from existing firms expanding rather than new competitors entering the market.

The unresolved question is whether state legislatures will treat this as a reason to require more transparency and clawback provisions on mega-subsidy deals, or whether the political incentive to announce a big splashy jobs number at a press conference will keep outweighing the economic literature on how those deals actually play out.