Rent seeking and the welfare cost of trade barriers

This paper estimates the potential social cost of trade barriers using the Harberger and the Tullock/Posner approaches for a sample of U.S. food and tobacco manufacturing industries. In addition, it tests the relationship between the computed welfare losses and special-interest political activity (PAC contributions). If all rents were dissipated through rent seeking, the social cost of trade barriers would be about 12.5 percent of domestic consumption and would be particularly large for sugar and milk products where quotas are the main instrument of protection. Furthermore, the results indicate that welfare losses are positively associated with industry lobbying but the strength of such association is strongly dependent on industry concentration.     

Lobbying and Taxes

Lobbying dominates corporate political spending, but comprehensive studies of the benefits accrued are scarce. Using a dataset of all U.S. firms with publicly available financial statements, we delve into the tax benefits obtained from lobbying. Firms that spend more on lobbying in a given year pay lower effective tax rates in the next year. Increasing registered lobbying expenditures by 1% appears to lower effective tax rates by somewhere in the range of 0.5 to 1.6 percentage points for the average firm that lobbies. While individual firms amass considerable benefits, the costs of lobbying-induced tax breaks appear modest for the government.     

Lobbying and compromise

The compromise enhancing effect of lobbying on public policy has been established in two typical settings. In the first, lobbies are assumed to act as “principals” and the setters of the policy (the candidates in a Downsian electoral competition or the elected policy maker in a citizen-candidate model of electoral competition) are conceived as “agents”. In the second setting, the proposed policies are solely determined by the lobbies who are assumed to take the dual role of “principals” in one stage of the public-policy game and ‘agents’ in its second stage. The objective of this paper is to demonstrate that in the latter setting, the compromising effect of lobbying need not exist. Our reduced-form, two-stage public-policy contest, where two interest groups compete on the approval or rejection of the policy set by a politician, is sufficient to show that the proposed and possibly implemented policy can be more extreme and less efficient than the preferred policies of the interest groups. In such situations then more than the calf (interest groups) wish to suck the cow (politician) desires to suckle thereby threatening the public well being more than the lobbying interest groups. The main result specifies the conditions that give rise to such a situation under both the perfectly and imperfectly discriminating contests.     

Lobbying and asymmetric information

Informational lobbying — the use by interest groups of their (alleged) expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies — is often regarded as an important means of influence. This paper analyzes this phenomenon in a game setting. On the one hand, the interest group is assumed to have private information which is relevant to the policymaker, whilst, on the other hand, the policymaker is assumed to be fully aware of the strategic incentives of the interest group to (mis)report or conceal its private information. It is shown that in a setting of partially conflicting interests a rationale for informational lobbying can only exist if messages bear a cost to the interest group and if the group's preferences carry information in the ‘right direction’. Furthermore, it is shown that it is not the content of the message as such, but rather the characteristics of the interest group that induces potential changes in the policymaker's behavior. In addition, the model reveals some interesting results on the relation between, on the one hand, the occurrence and impact of lobbying and, on the other hand, the cost of lobbying, the stake which an interest group has in persuading the policymaker, the similarity between the policymaker's and the group's preferences, and the initial beliefs of the policymaker. Moreover, we relate the results to some empirical findings on lobbying. qu]Much of the pressure placed upon government and its agencies takes the form of freely provided “objective” studies showing the important outcomes to be expected from the enactment of particular policies (Bartlett, 1973: 133, his quotation marks). qu]The analysis here is vague. What is needed is an equilibrium model in which lobbying activities have influence. Incomplete information ought to be the key to building such a model that would explain why lobbying occurs (information, collusion with decision makers, and so on) and whether lobbying expenses are socially wasteful. (Tirole, 1989: Ch. 1.3, p. 77, Rentseeking behavior).     

On the Efficiency of By-Product Lobbying

To explain the existence of large lobbying groups, Olsonproposes a `by-product theory': large lobbies are by-productsof industry associations that operate as monopolists inprivate goods markets. This paper explicitly formulatesOlson's by-product theory of lobby funding and examines itsefficiency as a funding method. Lobbying efficiency isenhanced by the association's ability to price-discriminate.Price discrimination, in turn, is facilitated by theassociation's superior knowledge of its members'characteristics. The paper also examines the relationshipbetween lobby strength and industry size, as well as thequestion of `who exploits whom' under by-product lobbying.     

Lobbying, corruption and political influence

The paper explores the determinants of generalized trust across countries. The findings suggest that only few variables can be considered significant. Social polarization in the form of income inequality and ethnic diversity reduces trust, Protestantism and having a monarchy increases trust while post-communist societies are less trusting than other. The findings also provide support for the use of a standard indicator as a stable measure of generalized trust and emphasize the importance of taking endogeneity seriously.     

Lobbying and (de)centralization

This paper presents a positive theory of (de)centralization of policy decisions in an international union -defined as a supranational jurisdiction that may exercise a policy prerogative on behalf of member countries. I build a benchmark model where national lobbies can coordinate (i.e. form a trans-national lobby) at no cost and show that lobbying does not affect the fiscal regime. On the other hand, when interest groups cannot coordinate, decentralization emerges as a political equilibrium with lobbying. Policy centralization hurts national lobbies by increasing competition for influence. At a constitutional stage, interest groups induce politically motivated governments to reject centralization. Three extensions show that this result depends on the level of cross-border externalities; the voting rule at the constitutional stage; and the details of the institutional decision mechanism under centralization.     

Lobbying in the 21st century

This paper suggests that the nature of activism is changing to take account of the shifts in political and economic conditions. It further goes on to consider that as a result of these emerging trends we have witnessed a generational shift in how governments, businesses, interest groups and citizens will interact. It is possible to place the issues and questions that this new environment raises under a number of broad headings—Democracy and Dissent, Government and Parliament, Media, and Lobbying –each of which the paper deals with in turn. Copyright © 2003 Henry Stewart Publications.     

Market Structure,Tariff Lobbying and the Free-Rider Problem

The effect of changes in industry structure on the ability tomaintain a cooperative level of tariff lobbying are analyzed in arepeated game setting in which a simple trigger strategy is theenforcement mechanism. The difficulty of maintaining cooperation isidentified with the minimum discount factor necessary for themaintenance of cooperation. Factors which increase this criticalvalue of the discount parameter are said to make cooperation moredifficult. Some changes in industry structure which reduce measuredconcentration have ambiguous effects, while others may makecooperation among a given group of firms more likely.     

Intergovernmental Lobbying for the Passage of TEA-21

This article explains the role of the IGR lobby in the passageof TEA-21 and the nature of the coalitions and partnershipsformed by groups within the IGR lobby to accomplish their policygoals. The data for the study are divided into three realms.The first identifies the priorities of groups within the IGRlobby and the types of coalitions that groups entered into.These data were gathered through examinations of IGR lobby testimonybefore congressional committees, interviews with organizationaland congressional staff members, and from secondary sourcessuch as the official publications and websites of IGR lobbyorganizations. The second part seeks to gain a more preciseunderstanding of how state and local officials use non-PIG coalitionsand groups to press for their policy objectives by surveyingselected state and local government officials. Finally, thesurvey assesses the impact that IGR lobbying had on TEA-21.     

Lobbying when the decisionmaker can acquire independent information

Politicians trade off the cost of acquiring and processing information against the benefit of being re-elected. Lobbyists may possess private information upon which politicians would like to rely without the effort of verification. If the politician does not try to verify, however, the lobbyist has no incentive to be truthful. This is modelled as a game in which the lobbyist lobbies to show his conviction that the electorate is on his side. In equilibrium, sometimes the politician investigates, and sometimes the information is false. The lobbyists and the electorate benefit from the possibility of lobbying when the politician would otherwise vote in ignorance, but not when he would otherwise acquire his own information. The politician benefits in either case. Lobbying is most socially useful when the politician's investigation costs are high, when he is more certain of the electorate's views, and when the issue is less important.     

Lobbying by Law Firms: A Study of Lobbying by National Law Firms in Canberra1

This article examines the way in which national law firms lobby the federal government from their Canberra offices. It is based on extensive interviews with lobbyists from those law firms, other commercial lobbyists in Canberra and legal professional bodies. The article begins by establishing the unique nature of law firm lobbying. In particular, it looks at the technical skills law firm lobbyists possess, their access to specialist legal knowledge and their preference for administrative, over political, lobbying. The development of law firm lobbying is then discussed. This centres around changes to the legal profession, federal business laws and federal government decision-making. The article concludes by suggesting that law firm lobbying both reflects and stimulates changes in government decision-making and will grow in importance as the legal profession in Canberra grows.     

Lobbying and the 2006 U.S. midterm elections

• Lobbyists are inextricably intertwined with the electoral process in the United States, but rarely have they ever featured so prominently in an election year as in 2006. The midterm elections came at the end of a year in which the political news was often dominated by stories of lobbying scandal, most notably that involving Jack Abramoff. Lobbying was an important issue in many peoples' voting decisions, and moreover one of the immediate outcomes of the election was a raft of lobbying reform measures both in Congress and in the individual states. As one commentator put it: ‘For lobbyists, 2006 rolled by like a late‐night B movie where the earthquake wipes out the villagers who refused to heed the warning signs’ (Divis, 2006 ). This article reviews some of the most substantial lobbying scandals which emerged during 2006, considers how lobbying and lobbyists fared during the election campaigns, and analyses the various reforms which have recently been considered and implemented, before briefly examining how lobbyists will impact upon the 2008 election races.

Copyright © 2007 John Wiley & Sons, Ltd.     

Lobbying and lending by banks around the financial crisis by

Despite the unprecedented levels of liquidity provided by the Federal Reserve to banks during the 2007–2008 financial crisis, lending by banks slowed dramatically during and after that global episode. In this study, we propose that, given capital constraints, the lobbying expenditures by banks to combat Dodd-Frank might have crowded out lending activity. A variety of univariate and multivariate tests show that while lending by banks fell significantly around the financial crisis, lobbying rose dramatically. Our results also show that bank lobbying and lending are imperfect substitutes during non-crisis periods. Such substitutability likely is explained by the value perceived in the political connections gained through lobbying, such as the ability to influence regulation, preferential treatment on supervisory or enforcement decisions, and protection against adverse shocks in the form of government bailouts.

     

Lobbying,political connections and emergency lending by the Federal Reserve

This paper tests whether the political connections of banks were important in explaining participation in the Federal Reserve’s emergency lending programs during the recent financial crisis. Our multivariate tests show that banks that were politically connected—either through lobbying efforts or employment of politically connected individuals—were substantially more likely to participate in the Federal Reserve’s emergency loan programs. In economic terms, participation in these programs was 28–36% more likely for banks that were politically connected than for banks that were not politically connected. In our final set of tests, we attempt to identify a proper explanation for this peculiar relationship. While a broad literature speaks of the moral hazard associated with receiving bailouts, we test whether another type of moral hazard exists in the period preceding the bailout. In particular, we argue that, to the extent that political connections act as synthetic insurance, banks may have engaged in more risky behavior that lead them to the Fed’s emergency lending facilities. Tests seem to confirm this explanation.     

Do welfare benefits cause the welfare caseload?

Analyses of the welfare system generally examine one of five competing models: (1) The work disincentive model; (2) the human capital model; (3) the macroeconomic model; (4) the public choice model; or (5) the cost-of-job-loss model. This paper employs the Granger causality concept and the multiple-rank F statistic to test the implications of all five of these models simultaneously. The results offer modest support to all but the macroeconomic model. The relationships among welfare benefits, caseloads, and labor market conditions appear to be too complex to be fully captured by a single model.