Politician’s Asset Allocation and Economic Bill Proposals

We study the impact of politicians’ asset allocation on their economic bill proposals. Using a novel database of comprehensive financial disclosures of Congress members in South Korea, we find that the Congress members with more real estate assets in their portfolios are less likely to propose economic bills tightening the real estate market. To address endogeneity concerns, we use instrumental variables uniquely available in our empirical setting: earthquake and military tensions between South and North Korea. Controlling for other confounding factors, we argue that the result is mainly driven by politicians’ personal interests. When aggregating the real estate assets at the Congress level, we find that the Congress with more exposure to the real estate market proposes and approves less number of economic bills tightening the real estate markets. Our findings suggest that politicians’ financial positions have a material impact on their choice of economic bill proposals.