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Interest Groups, Influence And Welfare

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  • Richard Ball
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    Abstract

    This paper examines the social costs and benefits of special interest group political influence activities. It is commonly recognized that, to the extent that such activities induce legislators to choose policies that favor the interest group at the expense of society at large, they can reduce welfare. It may also be the case, however, that lobbying can convey information held by interest groups to policy-makers. When costless announcements would not be credible, interest groups can signal their private information through costly influence activities. To the extent that this information enables governments to choose better policies, lobbying can enhance welfare. A simple game between a special interest group and a policy-maker that captures this tradeoff between the distortionary costs and the informational benefits of political influence activities is developed. Welfare properties of the equilibria are analyzed, and conditions are derived under which social welfare is greater when lobbying occurs than it would be if lobbying were prohibited. In conclusion, the phenomenon analyzed in this paper is related to Bhagwati's taxonomy of DUP activities. Copyright 1995 Blackwell Publishers Ltd..

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Economics & Politics.

    Volume (Year): 7 (1995)
    Issue (Month): 2 (07)
    Pages: 119-146

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    Handle: RePEc:bla:ecopol:v:7:y:1995:i:2:p:119-146

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    Cited by:
    1. Gasmi, Farid & Malin, Eric & Tandé, François, 2004. "Lobbying in Antidumping," IDEI Working Papers 320, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Cotton, Christopher, 2009. "Should we tax or cap political contributions? A lobbying model with policy favors and access," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 831-842, August.
    3. Heijnen, P., 2007. "Informative advertising by an environmental group," CeNDEF Working Papers 07-02, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    4. Mohtadi, Hamid & Roe, Terry, 1998. "Growth, lobbying and public goods," European Journal of Political Economy, Elsevier, vol. 14(3), pages 453-473, August.
    5. DAHM, Matthias & PORTEIRO, Nicolas, 2003. "The political economy of interest groups: pressure and information," CORE Discussion Papers 2003057, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Lagerlof, Johan, 1997. "Lobbying, information, and private and social welfare," European Journal of Political Economy, Elsevier, vol. 13(3), pages 615-637, September.
    7. Austen-Smith, David & Banks, Jeffrey S., 2002. "Costly signaling and cheap talk in models of political influence," European Journal of Political Economy, Elsevier, vol. 18(2), pages 263-280, June.

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