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The pros and cons of the revolving door practice – the main arguments

This blog post profiles some of the main arguments in favour and against the practice of revolving door. It then examines to what extent these arguments are substantiated by the latest crop of empirical studies in the field, finding that downside risks outweigh upside benefits. This is the first part of a blog series on the revolving door phenomenon.

Some switching back and forth between public and private employment might be regarded as beneficial. One central argument in this regard is that having worked on or moving back and forth to the corporate side equips regulators and policy architects with specialised knowledge about and deeper practical insights into what are often very complex issues.  

According to this view, the revolving door makes for better regulators and policy-makers, and for better communication between the government and its stakeholders. A second line of reasoning in favour of the revolving door argues that it is the very prospect of future private sector employment that might attract the best candidates to lowly paid public service in the first place and/or incentivise civil servants to work extra hard and prove their mettle, in order to land much more lucrative jobs later.

These beneficial effects - sometimes referred to as “schooling”, “signalling competence”, “efficient communication” and “talent attraction” - are however juxtaposed by significant concerns about the negative effects of the revolving door.  According to this view the revolving door may serve as a subtle, rather implicit mechanism to reward complicit behaviour in public office with lucrative employment in the private sector side in later life. The revolving door in this context becomes a key driver and risk factor for policy capture by special interests. 

The message from the conceptual debate is very ambivalent but what does the evidence say? Is the revolving door good or bad?

First, a point of consensus: the revolving door phenomenon is growing rapidly. Lazarus et al. (2013) show the significant expansion of revolving door practices. Examining the career trajectories of members of Congress in the US they find that while in the 1970s less than 10% of Congress members left to become lobbyists, this proportion has more than quintupled today: more than half of all Congress members who left in 2012 have already registered as lobbyists. Similarly, Shive and Forster (2014) find that publicly listed financial firms have expanded their hiring of ex-regulators in the US between 18 and 55% in the course of the last decade alone.  And data collected by Lucca et al. (2014) shows that staff flows between financial institutions and the six major US regulators in this area has doubled in the wake of the financial crisis and heightened regulatory attention.

Sporadic green shoots

A small number of recent studies provide some tentative support for a beneficial impact of the revolving door in some contexts. Lucca et al. (2014) examine the fluctuations in staff movements between banking regulators and banks in the US and find patterns consistent with the schooling hypothesis. Similarly,  a study by deHaan et al. (2014) about SEC lawyers that later shift to the private sector lends some tentative evidence for a signalling effect: the authors show that these revolvers complete enforcement cases with more aggressive outcomes in terms of fines and criminal convictions than their peers. However the authors appropriately acknowledge the limitations of their findings. An eagerness to signal competence and please future private sector employers might primarily translate into picking cases that are easy to win and by shying away from the bigger more risky ones. This type of revolving-door- induced lenience via case selection was not examined.  And one could add from a conceptual perspective that being regarded as too abrasive and anti-business might not amount to a good sales pitch to a future employers either, who is unlikely to hire an all-too-“difficult” character. So the argument about the revolving door encouraging regulatory zeal to signal competence looks on closer inspection like a rather limited one in the first place.

The weight of facts on the less positive side

These positive empirical aspects notwithstanding, a much larger body of new evidence comes down quite distinctively on the negative impact of the revolving door.

Connections more than expertise

LaPira and Thomas (2012) examine biographies of a large number of lobbyists in the US and find that the ones that have gone through the revolving door represent clients on a much broader set of policy issues than their peers. This suggests that they are hired not for their competence but for their connections and special access acquired while working in government, thus casting significant doubt on the schooling hypothesis.

Special benefits documented

Others track the practical advantages and special benefits that revolving door lobbyists offer to their corporate principals. Luechinger and Moser (2012) analyse the revolving door between the US Defence Department and the defence industry during the six previous administrations. They find that companies with significant revolving door activity were able to realise abnormal stock market returns. Interestingly, they managed to do so not only by hiring former defence department officials, but also during inbound rotations, when former employees of theirs moved into government positions. In a similar vein, Lazarus and McKay (2012) demonstrate that universities that make use of lobbyists manage to secure more public funding than their non-lobbying peers and they also find that this effect is even greater when the revolving door comes into play and universities receive even more public money when retaining lobbyists that used to work in government.  Katic and Kim (2013) show that companies in the US that work with revolving door lobbyists secure faster regulatory approval than their competitors for genetically-modified crops.  Choi (2013) finds that senior judges in Korea who switched to the private sector as lawyers help their defendant clients get off the hook with significantly more lenient sentences - even when taking differences in expertise and competence into account.

Financial (in)dependence

A batch of recent studies on the revolving door in the financial sector – an extremely popular area of inquiry in the wake of the financial crisis - arrive at similar conclusions about the special advantage that can be gained via the revolving door. Financial firms that hire ex-regulators are found to experience a rise in their stock price when announcing the new hires to the public. (Shive and Forster, 2014). The ones that poach staff from rating agencies (not strictly a public institution, but whose independence is of pivotal importance to the global financial architecture) are also found to obtain special treatment. They are much more likely to receive favourable ratings for their products from rating analysts that were about to switch sides (Cornaggia et al., 2014) or when they hire people that had just recently done so (Jiang et al. 2014).

While correlation does not prove causality, all these studies at a minimum further corroborate the premise that revolving door practices have played a significant role in building the close ties between government and business that may have stymied effective oversight and helped create and exacerbate the financial crisis.

Given the weight of the evidence on both the growth and significant downside risk of the revolving door, it appears imperative to closely monitor and track this phenomenon. This is the focus of a second blog by Dieter Zinnbauer for this blog series on the revolving door phenomenon.



H. Choi, “Revolving Door Attonreys and the Power of Connections: Evidence from Korea”, Working Paper (2013). Available at Choi JOB_Market_Econ_Reduced.pdf

J. Cornaggia et al., “Revolving Doors on Wall Street”, Working Paper (2014).  Available at SSRN:

E. deHaan et al., “Does the Revolving Door Affect the SEC’s Enforcement Outcomes?”, Rock Center for Corporate Governance at Stanford University Working Paper No. 18 (2014).

J. Jiang et al., “Former Rating Analysts and the Ratings of MBS and ABS: Evidence from LinkedIn” (2014). Available at SSRN:

I. Katic and J. Kim, "Caught in the Revolving Door: Firm-government Ties as Determinants of Regulatory Outcomes", Annual Meeting Paper, American Sociological Association Annual Meeting (2013).

T. LaPira and H. Thomas, “Revolving Doors: Lobbyists' Government Experience, Expertise, and Access in Political Context”, Annual Meeting Paper, American Political Science Association (2012). Available at SSRN:

J. Lazarus et al., “Who Goes Through the 'Revolving Door'? Examining the Lobbying Activity of Former Congress Members and Staffers”, Annual Meeting Paper, American Political Science Association (2013). Available at SSRN:

J. Lazarus and A. McKay, “Consequences of the Revolving Door: Evaluating the Lobbying Success of Former Congressional Members and Staff”, Annual Meeting Paper, Midwest Political Science Association (2012).

D. Lucca et al., “The Revolving Door and Worker Flows in Banking Regulation”, NBER Working Paper No. 20241 (2014).

S. Luechinger and Ch. Moser, “The Value of the Revolving Door: Political Appointees and the Stock Market”, KOF Working Papers No. 310 (2012). Available at SSRN:

S. Shive and M. Foster, “The Revolving Door for Financial Regulators”, Working Paper (2014). Available at SSRN:

Author : Dieter Zinnbauer

21 Oct 2014

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