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Policy Reform and the Free-Rider Problem

Author

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  • John R. Conlon
  • Paul Pecorino

Abstract

We investigate policy reform in a model with both lobbying, which involves a free-rider problem, and ordinary rent seeking, which does not. These activities involve similar skills, so a reform which reduces rents shifts labor into lobbying. Also, because of the free-rider problem, the marginal return to the industry from lobbying may greatly exceed an individual firm's return to lobbying. Thus, the shift into lobbying caused by rent reduction may lead to large increases in transfers to the lobbying industry. Under some circumstances, a reform which reduces available rents increases total rents plus transfers to the industry.

Suggested Citation

  • John R. Conlon & Paul Pecorino, 2004. "Policy Reform and the Free-Rider Problem," Public Choice, Springer, vol. 120(1_2), pages 123-142, July.
    • Handle: RePEc:kap:pubcho:v:120:y:2004:i:1_2:p:123-142
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    Cited by:

    1. Anica Zeyen & Markus Beckmann & Stella Wolters, 2016. "Actor and Institutional Dynamics in the Development of Multi-stakeholder Initiatives," Journal of Business Ethics, Springer, vol. 135(2), pages 341-360, May.
    2. George Economides & Sarantis Kalyvitis & Apostolis Philippopoulos, 2008. "Does foreign aid distort incentives and hurt growth? Theory and evidence from 75 aid-recipient countries," Public Choice, Springer, vol. 134(3), pages 463-488, March.
    3. S. Sethi & Donald Schepers, 2014. "United Nations Global Compact: The Promise–Performance Gap," Journal of Business Ethics, Springer, vol. 122(2), pages 193-208, June.

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