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Inter-State Spillovers and Lobbying

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Author Info

  • Evgeny Yakovlev

    ()
    (UC Berkeley)

  • Ekaterina Zhuravskaya

    ()
    (New Economic School, CEFIR, and CEPR)

  • Sergei Guriev

    ()
    (New Economic School)

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 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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File URL: http://www.cas.hse.ru/Repec/pdf/WP13_2007_16.pdf
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Bibliographic Info

Paper provided by Laboratory for Macroeconomic Analysis in its series Working Papers with number WP13_2007_16.

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Length: 45 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:cas:wpaper:wp13_2007_16

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Related research

Keywords: interest groups; lobbying; inter-regional trade barriers; tariffs; multinationals; federalism;

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