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Interest group politics in a federation

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Author Info

  • Guriev, Sergei
  • Yakovlev, Evgeny
  • Zhuravskaya, Ekaterina

Abstract

The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by the spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state externalities to a larger extent than the lobbyists with interests within a single state. We use variation in the geographic boundaries of politically-powerful industrial interests to estimate the effect of inter-state externalities on firm performance. Using firm-level panel data from a peripheralized federation, Russia in 1996-2003, we show that, controlling for firm fixed effects, the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi-regional business groups compared to the number influenced by local business groups. Our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter-state externalities.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 94 (2010)
Issue (Month): 9-10 (October)
Pages: 730-748

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Handle: RePEc:eee:pubeco:v:94:y:2010:i:9-10:p:730-748

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Federalism Interest groups Inter-jurisdictional externalities Inter-state trade barriers Multinational firms;

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References

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Citations

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Cited by:
  1. Pol Antràs & Gerard Padró i Miquel, 2008. "Foreign Influence and Welfare," NBER Working Papers 14129, National Bureau of Economic Research, Inc.
  2. Markevich, Andrei & Zhuravskaya, Ekaterina, 2011. "M-form hierarchy with poorly-diversified divisions: A case of Khrushchev's reform in Soviet Russia," Journal of Public Economics, Elsevier, vol. 95(11), pages 1550-1560.
  3. Libman, Alexander, 2013. "Natural resources and sub-national economic performance: Does sub-national democracy matter?," Energy Economics, Elsevier, vol. 37(C), pages 82-99.
  4. Andrei Govorun & Israel Marques & William Pyle, 2013. "The political roots of intermediated lobbying: evidence from Russian firms and business associations," HSE Working papers WP BRP 46/EC/2013, National Research University Higher School of Economics.

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