Firm characteristics and influence on government rule-making: Theory and evidence

► We differentiate intrinsic and exerted influence in a formal political economy model. ► The endogeneity of exerted influence highlights problems for previous empirical work. ► Regulatory economies of scale produce counter-intuitive predictions for large firms. ► Large firms are more influential, more subsidized and more constrained by regulation. ► International, firm-level data confirm these and other model predictions.