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Should We Really Expect More from Our Friends?

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Author Info
Laussel, Didier
van Ypersele, Tanguy

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Abstract

In the present paper, we analyze an original channel of interaction between politicians and lobbies i.e. the nuisance power of a lobby. Some lobbies are influencing public policies just because they are able to impact negatively the image of a politician. More particularly, we develop a setting in which unions may transmit some information to the voters about the quality of the government via a costly signal i.e. a strike. In our setting unions represent sectors of the economy. An incumbent government seeking reelection allocates a fixed budget among several unionized sectors. Strikes are costly and transmit information to voters about the quality of the government. The politician may have interest to distort the budget allocation away from the efficient one in order to maximize his/her probability of reelection. In most cases a hostile receive receives more than a neutral/friendly one.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6233.

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Date of creation: Apr 2007
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Handle: RePEc:cpr:ceprdp:6233

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Related research
Keywords: Lobby; Political Economy; Strike;

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Find related papers by JEL classification:
D7 - Microeconomics - - Analysis of Collective Decision-Making

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References listed on IDEAS
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  1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
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  2. Laffont, J.-J., 1999. "Political Economy, Information and Incentives," Papers 99.516, Toulouse - GREMAQ.
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  3. Prat, Andrea, 2002. "Campaign Advertising and Voter Welfare," Review of Economic Studies, Blackwell Publishing, vol. 69(4), pages 999-1017, October.
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  4. Lohmann, Susanne, 1994. "Information Aggregation through Costly Political Action," American Economic Review, American Economic Association, vol. 84(3), pages 518-30, June. [Downloadable!] (restricted)
  5. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August. [Downloadable!] (restricted)
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  6. Gene M. Grossman & Elhanan Helpman, 1999. "Competing for Endorsements," American Economic Review, American Economic Association, vol. 89(3), pages 501-524, June. [Downloadable!] (restricted)
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  7. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November. [Downloadable!] (restricted)
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