Advanced Search
MyIDEAS: Login to save this article or follow this journal

The political economy of investment: Sclerotic effects from interest groups

Contents:

Author Info

  • Coates, Dennis
  • Heckelman, Jac C.
  • Wilson, Bonnie

Abstract

We investigate the relationship between interest group activity and investment by analyzing an unbalanced panel of observations on 126 countries over three time periods. We find that the number of interest groups in a nation is negatively related to investment, consistent with a sclerotic effect due to rent-seeking by interest groups. Our findings are robust to the inclusion of a variety of additional common controls in the specification, to potential outlying observations, and to varied sample-selection procedures. We do find, however, that the sclerotic impact of groups on investment is stronger across developed OECD countries than for the developing non-OECD countries. Effects also tend to be stronger in democratic nations, but are dependent upon how strict a definition of democracy is used.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V97-4Y0D621-2/2/16b00095cc0879077c3bb497a4e3e27d
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 26 (2010)
Issue (Month): 2 (June)
Pages: 208-221

as in new window
Handle: RePEc:eee:poleco:v:26:y:2010:i:2:p:208-221

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505544

Related research

Keywords: Investment Institutional sclerosis Interest groups Sample-selection bias;

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Philipp Harms & Heinrich W. Ursprung, 2002. "Do Civil and Political Repression Really Boost Foreign Direct Investments?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 651-663, October.
  2. Bischoff, Ivo, 2003. " Determinants of the Increase in the Number of Interest Groups in Western Democracies: Theoretical Considerations and Evidence from 21 OECD Countries," Public Choice, Springer, vol. 114(1-2), pages 197-218, January.
  3. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  4. Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-79, May.
  5. Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
  6. David Stasavage, 2002. "Private Investment and Political Institutions," Economics and Politics, Wiley Blackwell, vol. 14(1), pages 41-63.
  7. Crain, W Mark & Lee, Katherine J, 1999. "Economic Growth Regressions for the American States: A Sensitivity Analysis," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 242-57, April.
  8. Ndikumana, Leonce, 2005. "Financial development, financial structure, and domestic investment: International evidence," Journal of International Money and Finance, Elsevier, vol. 24(4), pages 651-673, June.
  9. Stephen L. Parente & Edward C. Prescott, 1997. "Monopoly rights: a barrier to riches," Staff Report 236, Federal Reserve Bank of Minneapolis.
  10. Lee, J.-W. & Barro, R.J., 1998. "Schooling Quality in a Cross Section of Countries," Papers 659, Harvard - Institute for International Development.
  11. Berthold Herrendorf & Arilton Teixeira, 2004. "Monopoly rights can reduce income big time," Macroeconomics 0404023, EconWPA.
  12. Ahmet Faruk Aysan & M. K. Nabli & M-A Veganzones-Varoudakis, 2006. "Governance Institutions and Private Investment: An Application to the Middle East and North Africa," Working Papers 2006/08, Bogazici University, Department of Economics.
  13. Doner Richard F. & Schneider Ben Ross, 2000. "Business Associations and Economic Development: Why Some Associations Contribute More Than Others," Business and Politics, De Gruyter, vol. 2(3), pages 1-29, December.
  14. Jac C. Heckelman & Stephen Knack, 2009. "Aid, Economic Freedom, And Growth," Contemporary Economic Policy, Western Economic Association International, vol. 27(1), pages 46-53, 01.
  15. Bertocchi, Graziella & Canova, Fabio, 2002. "Did colonization matter for growth?: An empirical exploration into the historical causes of Africa's underdevelopment," European Economic Review, Elsevier, vol. 46(10), pages 1851-1871, December.
  16. Dennis Coates & Jac Heckelman & Bonnie Wilson, 2007. "Determinants of interest group formation," Public Choice, Springer, vol. 133(3), pages 377-391, December.
  17. Elizabeth Asiedu, 2006. "Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability," The World Economy, Wiley Blackwell, vol. 29(1), pages 63-77, 01.
  18. Adam, Antonis & Filippaios, Fragkiskos, 2007. "Foreign direct investment and civil liberties: A new perspective," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1038-1052, December.
  19. Edgardo Campos, J. & Lien, Donald & Pradhan, Sanjay, 1999. "The Impact of Corruption on Investment: Predictability Matters," World Development, Elsevier, vol. 27(6), pages 1059-1067, June.
  20. Erich Weede, 1984. "Democracy, creeping socialism, and ideological socialism in rent-seeking societies," Public Choice, Springer, vol. 44(2), pages 349-366, January.
  21. Ndikumana, Leonce, 2000. "Financial Determinants of Domestic Investment in Sub-Saharan Africa: Evidence from Panel Data," World Development, Elsevier, vol. 28(2), pages 381-400, February.
  22. Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
  23. Coates, Dennis & Heckelman, Jac C, 2003. " Interest Groups and Investment: A Further Test of the Olson Hypothesis," Public Choice, Springer, vol. 117(3-4), pages 333-40, December.
  24. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  25. Aymo Brunetti & Beatrice Weder, 1998. "Investment and institutional uncertainty: A comparative study of different uncertainty measures," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(3), pages 513-533, September.
  26. Svensson, Jakob, 1998. "Investment, property rights and political instability: Theory and evidence," European Economic Review, Elsevier, vol. 42(7), pages 1317-1341, July.
  27. Quiggin, John, 1992. "Testing the Implications of the Olson Hypothesis," Economica, London School of Economics and Political Science, vol. 59(235), pages 261-77, August.
  28. J. Barkley Rosser Jr, 2007. "The Rise and Decline of Mancur Olson's View of The Rise and Decline of Nations," Southern Economic Journal, Southern Economic Association, vol. 74(1), pages 4-17, July.
  29. Hineline, David R., 2008. "Parameter heterogeneity in growth regressions," Economics Letters, Elsevier, vol. 101(2), pages 126-129, November.
  30. Egger, Peter & Winner, Hannes, 2005. "Evidence on corruption as an incentive for foreign direct investment," European Journal of Political Economy, Elsevier, vol. 21(4), pages 932-952, December.
  31. Olson, Mancur, 1963. "Rapid Growth as a Destabilizing Force," The Journal of Economic History, Cambridge University Press, vol. 23(04), pages 529-552, December.
  32. Bengoa, Marta & Sanchez-Robles, Blanca, 2003. "Foreign direct investment, economic freedom and growth: new evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 19(3), pages 529-545, September.
  33. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  34. Stephen L. Parente & Rui Zhao, 2006. "Slow Development And Special Interests," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 991-1011, 08.
  35. Heckelman, Jac C, 2000. " Consistent Estimates of the Impact of Special Interest Groups on Economic Growth," Public Choice, Springer, vol. 104(3-4), pages 319-27, September.
  36. Knack, Stephen, 2003. " Groups, Growth and Trust: Cross-Country Evidence on the Olson and Putnam Hypotheses," Public Choice, Springer, vol. 117(3-4), pages 341-55, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. repec:slu:wpaper:2007-01 is not listed on IDEAS
  2. Bilin Neyapti, 2010. "Modeling Institutional Evolution," Koç University-TUSIAD Economic Research Forum Working Papers 1012, Koc University-TUSIAD Economic Research Forum.
  3. Frye, Timothy M. & Iwasaki, Ichiro, 2011. "Government directors and business–state relations in Russia," European Journal of Political Economy, Elsevier, vol. 27(4), pages 642-658.
  4. Christian Bjørnskov, 2014. "Do Economic Reforms Alleviate Subjective Well-Being Losses of Economic Crises?," Journal of Happiness Studies, Springer, vol. 15(1), pages 163-182, February.
  5. Yakovlev, A. & Govorun, A., 2011. "Business Associations as a Business-Government Liaison: An Empirical Analysis," Journal of the New Economic Association, New Economic Association, issue 9, pages 98-127.
  6. Salaber, Julie, 2013. "Religion and returns in Europe," European Journal of Political Economy, Elsevier, vol. 32(C), pages 149-160.
  7. Dennis Coates & Jac Heckelman & Bonnie Wilson, 2011. "Special-interest groups and growth," Public Choice, Springer, vol. 147(3), pages 439-457, June.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:26:y:2010:i:2:p:208-221. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.