Presidential Particularism (and the Trump Anomaly): Evidence from Federal Contract Awards and Capital Markets

Abstract We document presidential particularism in the allocation of U.S. federal government contracts. Firms in “Swing” and “Core” states receive disproportionately higher federal contracts during election cycles. Contracts peak in reelection years for incumbent presidents suggesting electoral and partisan motives. Awards to “Core” states fall relative to “Hostile” states in election years of the presidents’ second terms. Government agencies engage more aggressively in particularism when aligned with the president’s party. Particularism disappeared during the Trump presidency, with Hostile-state firms awarded more contracts. Market participants, who are slow to recognize the relationship between particularism and corporate earning, underreact to this phenomenon.