Interest group size dynamics and policymaking

We present a dynamic model of endogenous interest group sizes and policymaking. The model integrates ‘top-down' (policy) and `bottom-up' (individual and social-structural) influences on the development of interest groups. Comparative statics results show that the standard assumption of fixed-sized interest groups can be misleading. Furthermore, dynamic analysis of the model demonstrates that reliance on equilibrium results can also be misleading since equilibria may be unstable. Complicated dynamics may then emerge naturally, leading to erratic time patterns for policy and interest group sizes. Our model can endogenously generate the types of spurts and declines in organizational density reported in empirical studies.     

Interest group networks in the European Union

Interest group networks are crucial for understanding European Union (EU) integration, policymaking and interest representation. Yet, comparative analysis of interest organisation networks across EU policy areas is limited. This study provides the first large-scale investigation of interest group information networks across all EU policy domains. We argue that interest groups prioritise access to trustworthy and high-quality information coming from partners with shared policy goals. Thus, interest organisations form network ties with other organisations if the latter are from the same country, represent the same type of interest, or are policy insiders. The effect of these three factors varies across policy domains depending on the extent to which the institutional setting assures equal and broad organisational access to decision-making. Our empirical analysis operationalises information ties as Twitter-follower relationships among 7,388 interest organisations. In the first step of the analysis, we use Exponential Random Graph Models to examine tie formation in the full network and across 40 policy domains. We find strong but variable effects of country and interest type homophily and policy insiderness on the creation of network ties. In the second step, we examine how the effect of these three variables on tie formation varies with policy domain characteristics. We find that shared interest type and policy insiderness are less relevant for tie formation in (re-)distributive and especially regulatory policy domains characterised by more supranational decision-making. Sharing an interest type and being a policy insider matters more for tie formation in foreign and interior policies where decision-making is more intergovernmental. The effect of country homophily is less clearly related to policy type and decision-making mode. Our findings emphasise the importance of institutional and policy context in shaping interest group networks in the EU.     

Interest group activity and long-run stock market performance

This paper provides evidence that interest group activity is negatively related to aggregate stock market performance. In particular, the findings imply that a one percent increase in the number of interest groups in a country is associated with a reduction in average annual stock market returns of roughly 2–5%, and a reduction in the volatility of annual stock returns of roughly 6–14%. In addition, the findings indicate that many of the same fundamentals that drive economic growth also explain stock market performance.     

Interest group strategies in multi‐level Europe

• This article analyzes the political responses of French and Italian business associations to Economic and Monetary Union (EMU) in the EU. I propose and test the empirical relevance of a multi‐level lobbying model for multi‐tiered systems, a model assumed by, but never systematically examined in, the pluralism literature. Data for this ten‐sector cross‐national panel study come from personal interviews with the presidents of French and Italian business associations. The interviews were held at the beginning and the end of the euro implementation process. The research shows that organized groups routinely overstep their territorial jurisdictions to lobby across multiple levels of government in multi‐level Europe. The degree of state political decentralization is a statistically significant variable in explaining the choice of lobbying target. This ‘crucial comparative case study’ finds that, in adjusting to deeper economic integration, regional associations in France focus their energy on the central government, while Italian groups favour the regional government.

Copyright © 2007 John Wiley & Sons, Ltd.     

Testing for causality between government spending and taxation

In the past few years the public sector deficit in Greece has reached alarmingly high levels. In view of the various hypotheses about the relation between government spending and revenues, we test for causality between these two determinants of public deficit.     

Slovenia: Interest group developments in a postsocialist‐liberal democracy

Slovenia has a rich tradition of associations and interest group activity dating back to the 19th century. To some extent, the development of the group system was stymied by the 60 years of authoritarian rule from the early 1930s to the late 1980s. However, the resilience of this tradition is evident in major developments in group activity since the return to democracy. In addition to influences from the past, including a neocorporatist tradition, is the impact of Slovenia's process of integration into the European Union. This article considers the extent to which the modern nature of the interest group system is both constrained by hangovers from the past but enhances by European integration, both of which have affected the development of Slovenia's majoritarian democracy.     

Budget institutions and taxation

While a number of different studies have explored the effects of budgetary procedures and the centralization of the budget process on government debt, deficits and spending, few of them have explored whether such fiscal institutions matter for public revenue. This article argues that centralizing the budget process raises the levels of taxation by limiting the ability of individual government officials to veto tax increases in line with common-pool-problem arguments regarding public finances. Using detailed data on budgetary procedures from 15 EU countries, the empirical analysis shows that greater centralization of the budget process increases taxation as a share of GDP and that both the type of budget centralization and level of government fractionalization matter for the size of this effect. The results suggest that further centralizing the budget process limits government debt and deficits by increasing public revenues as well as constraining public spending.     

The economics of AIDS-related health insurance regulations: Interest group influence and ideology

The projected growth in the U.S. in the number of persons with AIDS has created concern about sources of financing the costs of health care services for persons with AIDS. Private health insurers have modified or considered modifying underwriting practices in response to the AIDS epidemic, but several state governments have developed significant regulatory constraints on AIDS-related underwriting practices. We model the state government's decision to impose AIDS-related regulatory constraints (HIV testing restrictions, restrictions on the use of information about sexual orientation, and mandated AIDS coverage). We find that HIV-testing restrictions tend to be more likely in states with relatively high AIDS prevalence rates and insurance industries that are relatively weak politically. States with prevailing attitudes favorable to persons with AIDS (i.e., relatively liberal states) are more likely than other states to impose HIV-testing restrictions. Measures of prevailing attitudes (ideology) appear to be the primary determinants of regulations prohibiting questions about sexual orientation, but economic interests are the primary determinants of mandated AIDS coverage.The authors would like to acknowledge the helpful comments and suggestions of Ned Becker, Janet Bronstein, David Colby, Patrick Donnelly, Roger Faith, Robert Hughes, Robert McGuire, Delfi Mondragón, Mike Morrisey, Jack Nelson and an anonymous reviewer, with the usual disclaimer.     

Interest group representation and framing in the media: A policy area perspective

This article analyzes interest group representation and framing in the news media. In contrast to previous work, it focuses on the role of the policy area in shaping the types of groups appearing in the media and the frames used by groups. Empirically, the analysis maps group representation and framing across six different policy areas in the Danish news media. It distinguishes between whether groups frame their viewpoints as furthering (a) the interests of group members, (b) the interests of other specific societal groups, (c) broad economic concerns, or (d) public interests in general. Interest group representation and framing is found to vary between these policy areas. Some areas mainly contrast economic groups and the interests of their members, whereas debates in other areas are more likely to be shaped by references to beneficiaries of welfare state services or broad, public interests.     

Worldwide experience in sales taxation: Lessons for North America

Worldwide fiscal experience over the past twenty-five years indicates steady expansion in the political and academic constituency for expenditure taxation, including indirect taxes on consumption. Retail levies have emerged as the preferred method of indirect taxation of consumption, as older, pre-retail sales taxes have proven unsuited to modern economic structures. Increasingly, reform of sales taxation has involved a shift to one particular form of tax, the European Community type of value-added tax (VAT). This consumption tax option is again a topic of policy debate in North America, particularly in Canada where a VAT was under active consideration in 1985.This paper sifts through worldwide experience with broad-based sales taxes to identify lessons for tax policy in North America both in the short and longer-run. It indicates that the reputation of such taxes as regressive instruments may have been much exaggerated, and that in any case methods are available, particularly in Canada, for resolving equity issues in sales taxation. The VAT is shown to have marginal economic and administrative advantages over single-stage federal retail taxes in both Canada and the US. However, these advantages are not nearly so significant as in European countries where the VAT was adopted there. Further, sensible debate over the merits and limitations of the VAT in North America will call for much closer scrutiny of the problems unique to this form of tax. Finally, three political issues that were not significant in Europe will likely have an important bearing on any future choices of sales tax instruments, both in the U.S. and in Canada.     

Efficient bilateral taxation of externalities

We consider the quadratic voting mechanism (Lalley and Weyl in Quadratic voting. Working paper, University of Chicago, 2015; Weyl in The robustness of quadratic voting. Working paper, University of Chicago, 2015) and focus on the incentives it provides individuals deciding what proposals or candidates to put up for a vote. The incentive compatibility of quadratic voting rests upon the assumption that individuals value the money used to buy votes, while the budget balance/efficiency of the mechanism requires that the money spent by one voter by redistributed among the other voters. From these assumptions, we show that it follows that strategic proposers will have an incentive to offer proposals with greater uncertainty about individual values. Similarly, we show that, in an electoral setting, quadratic voting provides an incentive to propose candidates with polarized, non-convergent platforms.     

Progressive taxation and tax morale

Due to strong evidence indicating that tax morale affects actual tax-paying behavior, finding the determinants of tax morale could help both to understand and to fight tax evasion. In this paper we analyze the effect of progressive taxation on individual tax morale using a cross-country approach—a research question that has not been investigated in the existing literature. Our theoretical analysis leads to two testable predictions. First, an individual’s tax morale is higher, the more progressive the tax schedule is. Second, the positive impact of tax progressivity on tax morale declines with income. In our empirical analysis we make use of a unique dataset of tax progressivity measures, namely the World Tax Indicators, and follow most of the tax morale literature by employing the World Values Survey to measure individual tax morale. Controlling for a wide range of potential confounders, we are able to confirm both hypotheses in our empirical analysis.     

Interest group dynamics in a weak and transitional state: the case of Bolivia

Bolivia's political development has been characterized by elitist control set in an environment of political instability and a weak decentralized state. Since the 1980s and Bolivia's transition to a limited form of democracy, this elitist control has been successfully challenged from the left and, since the early 2000s, particularly by the indigenous population. In fact, Bolivian contemporary politics and interest group activity have been shaped mainly by the rise in political power of the left and indigenous interests. This rise, given a weak state transitioning to limited democracy, has had several consequences for interest group activity that add increasing complexity to the group system. One consequence of Bolivia's course of political development is that, although it exhibits many common elements of interest group activity explained by existing group theories, aspects of its group development are not adequately accounted for by these theories. In addition, there are questions about whether the new configuration of interest groups promotes or undermines democracy. Copyright © 2014 John Wiley & Sons, Ltd.     

No direct taxation without new elite representation: Industrialization and the domestic politics of taxation

The nineteenth century marked the founding period of modern public finance. We examine the domestic and non-war related determinants of direct taxation in this early democratic period and in a state building context. We argue that the reasons for the expansion of direct taxation can be found in the political competition between different elite groups in the context of industrialization. Systematically differentiating between economic and political arenas, we show that intra-elite competition in industrializing economies leads to higher levels of direct taxation only if the new economic elites are able to translate their economic power into the political arena, either through the representative system or by extra-parliamentary means. In addition, we demonstrate that these processes are directly linked to public investments in policy areas related to the interests of new economic elites such as public education. Our analysis is based on novel subnational data from the period 1850 to 1910, enabling us to concentrate on the domestic determinants of direct taxation.     

State income taxation with mobile labor

The ability of state and local governments to use tax and other fiscal policies to redistribute income may be limited when labor is mobile. An analysis of the allocative and distributional effects of a state income tax shows that, by driving out taxed households, the burden of the tax may be shifted to immobile households and other owners of immobile factors of production and may impose an excess burden on them. The NBER TAXSIM model is used to calculate state income tax burdens for representative high-income households in 1986–1988. Further calculations based on assumed demand elasticities for labor indicate that if high-income households are mobile, the marginal excess burden of income taxes imposed on them may be of substantial size in certain states, especially among the highest income groups.     

Patriotism, taxation and international mobility

Patriotic citizens intrinsically prefer living in their native country compared to living in the Diaspora. In this paper, we analyze the consequences of such a “patriotic lock-in” in a world with international migration and redistributive taxation. One implication is that countries with more patriotic populations are associated with higher redistributive taxes. We then combine ISSP survey data with OECD taxation data and provide empirical evidence supporting this hypothesis. Our results provide a word of caution: the Treasury’s inherent interest in patriotic taxpayers may strengthen the political push for patriotism in an age of globalization and increased mobility.     

Toward Interest Inarticulation: A Major Consequence of Corporatism for Interest Organizations

The main issue discussed is the difficulties in collective action. Three logics of collective action are identified and discussed in terms of their implications for solidarity within interest organizations and for organizational action. Both solidarity and organizational action are important for successful policymaking. Policies can be decided without the support of the members, but their implementation may thus prove difficult. The theoretical issue of interest articulation by interest organizations is the important one here. The article concludes that encompassing organizations will most likely have difficulty in articulating a definite organizational policy. It is maintained that corporatism and public responsibility-taking can severely hamper the articulation of organized special interests. They lead to interest inarticulation. This may lead to legitimacy problems for the organization and be one explanation for the recent decline in certain established interest organizations in Sweden and recent discussions on the future of corporatism.