Government Gains from Self-Restraint: A Bargaining Theory of Inefficient Redistribution Policies
AbstractWe consider a bargaining model of the interaction between a government and interest groups in which, unlike existing models, neither side is assumed to have all the bargaining power. The government will then find it optimal to constrain itself in the use of transfer policies to improve its bargaining position. In a model of redistribution to lobbies, the government will find it optimal to cap the size of lump-sum transfers it makes below the unconstrained equilibrium level. One implication is that with the optimal cap on efficient subsidies in place, less efficient subsidies will be used for redistribution even when they serve no economic function. We thus offer an alternative theory that explains why governments may optimally choose to restrict efficient lump-sum transfers to interest groups and partially replace them with relatively less efficient transfers.
Download InfoIf 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.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4007.
Date of creation: Aug 2003
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-PBE-2003-10-05 (Public Economics)
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.:
- Grossman, G.M. & Helpman, E., 1992.
"Protection for Sale,"
162, Princeton, Woodrow Wilson School - Public and International Affairs.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
- Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
- Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
- Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-18, May.
- Drazen, Allan, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," CEPR Discussion Papers 3562, C.E.P.R. Discussion Papers.
- Gary S. Becker & Casey B. Mulligan, 1998.
"Deadweight Costs and the Size of Government,"
NBER Working Papers
6789, National Bureau of Economic Research, Inc.
- Gary S. Becker & Casey B. Mulligan, 1998. "Deadweight Costs and the Size of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 144, Chicago - Center for Study of Economy and State.
- Westcott, Paul C. & Young, C. Edwin & Price, J. Michael, 2002. "The 2002 Farm Act: Provisions And Implications For Commodity Markets," Agricultural Information Bulletins 33745, United States Department of Agriculture, Economic Research Service.
- Acemoglu, Daron & Robinson, James A, 1999. "Inefficient Redistribution," CEPR Discussion Papers 2122, C.E.P.R. Discussion Papers.
- Allan Drazen, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 36-67.
- Dixit, Avinash & Grossman, Gene M. & Helpman, Elhanan, 1997.
"Common Agency and Coordination: General Theory and Application to Government Policy Making,"
3450061, Harvard University Department of Economics.
- Dixit, Avinash & Grossman, Gene M & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 752-69, August.
- John Douglas Wilson, 1990. "Are Efficiency Improvements In Government Transfer Policies Self-Defeating In Political Equilibrium?," Economics and Politics, Wiley Blackwell, vol. 2(3), pages 241-258, November.
- Neil Bruce & Michael Waldman, 1988.
"Transfers in Kind: Why They Can Be Efficient and Non-Paternalistic,"
UCLA Economics Working Papers
532, UCLA Department of Economics.
- Bruce, Neil & Waldman, Michael, 1991. "Transfers in Kind: Why They Can Be Efficient and Nonpaternalistic," American Economic Review, American Economic Association, vol. 81(5), pages 1345-51, December.
- Dixit, Avinash K & Londregan, John, 1994. "Redistributive Politics and Economic Efficiency," CEPR Discussion Papers 1056, C.E.P.R. Discussion Papers.
- Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
- Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
- Rodrik, Dani, 1986. "Tariffs, subsidies, and welfare with endogenous policy," Journal of International Economics, Elsevier, vol. 21(3-4), pages 285-299, November.
- Amin, Mohammad & Mattoo, Aaditya, 2006. "Can guest worker schemes reduce illegal migration ?," Policy Research Working Paper Series 3828, The World Bank.
- Boerner, Kira, 2005. "Having Everyone in the Boat May Sink it - Interest Group Involvement and Policy Reforms," Discussion Papers in Economics 730, University of Munich, Department of Economics.
- Börner, Kira, 2004. "Political Economy Reasons for Government Inertia: The Role of Interest Groups in the Case of Access to Medicines," Discussion Papers in Economics 313, University of Munich, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.