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Inefficient lobbying, populism and oligarchy

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  • Francisco H. G. Ferreira

    ()
    (World Bank and Department of Economics PUC-Rio)

  • Filipe Campante

    ()
    (Harvard University)

Abstract

This paper analyses the efficiency consequences of lobbying in a production economy with imperfect commitment. We first show that the Pareto efficiency result found for truthful equilibria of common agency games in static exchange economies no longer holds under these more general conditions. We construct a model of pressure groups where the set of e.cient truthful common-agency equilibria has measure zero. Equilibria are generally inefficient as a direct result of the existence of groups with conflicting interests, which allocate real resources to lobbying. If lobbies representing "the poor " and "the rich " have identical organizational capacities, we show that these equilibria are biased towards the poor, who have a comparative advantage in politics, rather than in production. If the pressure groups di.er in their organizational capacity, both pro-rich (oligarchic) and pro-poor (populist) equilibria may arise, all of which are inefficient with respect to the constrained optimum.

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Bibliographic Info

Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 483.

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Length: 35 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:rio:texdis:483

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Citations

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Cited by:
  1. Ferreira, Francisco H. G. & Lakner, Christoph & Lugo, Maria Ana & Ozler, Berk, 2014. "Inequality of opportunity and economic growth : a cross-country analysis," Policy Research Working Paper Series 6915, The World Bank.
  2. Daniel Mejía & Carlos Esteban Posada, . "Populist Policies in the Transition to Democracy," Borradores de Economia 349, Banco de la Republica de Colombia.
  3. Elbers, Chris & Fujii, Tomoki & Lanjouw, Peter & Ozler, Berk & Yin, Wesley, 2007. "Poverty alleviation through geographic targeting: How much does disaggregation help?," Journal of Development Economics, Elsevier, vol. 83(1), pages 198-213, May.
  4. Zhang, Lei, 2008. "Political economy of income distribution dynamics," Journal of Development Economics, Elsevier, vol. 87(1), pages 119-139, August.
  5. Kaufmann, Daniel & Vicente, Pedro C., 2005. "Legal Corruption," MPRA Paper 8186, University Library of Munich, Germany.
  6. Safarzynska, Karolina & van den Bergh, Jeroen C.J.M., 2010. "Evolving power and environmental policy: Explaining institutional change with group selection," Ecological Economics, Elsevier, vol. 69(4), pages 743-752, February.
  7. Martimort, David & Semenov, Aggey, 2008. "Ideological uncertainty and lobbying competition," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 456-481, April.
  8. Sebastián J. Miller, 2011. "Why Do Populist-Outsiders Get Elected?: A Model of Strategic Populists," IDB Publications 37838, Inter-American Development Bank.

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