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It Takes Two to Tango: Lobbies and the Political Business Cycle

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  • Horgos, Daniel

    (Helmut Schmidt University, Hamburg)

  • Zimmermann, Klaus W.

    (Helmut Schmidt University, Hamburg)

Abstract

With interest groups significantly affecting economic performance (according to Mancur Olson) and a vital interest of governments in economic growth and low unemployment in order to win elections, there should be a link between political business cycles and the evolution of lobbies over time which has totally been ignored in the literature up to now. In modeling this link in a theoretical and empirical way we try to answer two questions: Is it possible to interpret Olson´s Law of Interest Groups not only as a long run phenomenon but also in a short-run perspective, integrating it into the theory of political business cycles? And: is there any empirical evidence that a typical pattern of lobby behavior and macroeconomic status exists which is consistent over a couple of election periods? In order to investigate these issues, we first analyze some literature that is usually ignored in the more technical contributions evaluating Olson´s law, but proves to be highly important as background for answering the above mentioned questions. We then illustrate how a model consisting of Olson´s interest-groups theory and the endeavors of governments to win the majority of votes in elections could look like, before we perform a time-series-analysis based on the lobby-list of the German Bundestag in order to gain some more insights into the relationships between lobbies, governments and voters. As a result we discover a consistent behavior of the lobbies over the cycle that boils down to some kind of non-aggression pact between the lobbies and the governments irrespective of their political alignments.

Suggested Citation

  • Horgos, Daniel & Zimmermann, Klaus W., 2009. "It Takes Two to Tango: Lobbies and the Political Business Cycle," Working Paper 98/2009, Helmut Schmidt University, Hamburg.
    • Handle: RePEc:ris:vhsuwp:2009_098
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    References listed on IDEAS

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    1. Martin C. McGuire & Mancur Olson, 1998. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," International Economic Association Series, in: Silvio Borner & Martin Paldam (ed.), The Political Dimension of Economic Growth, chapter 3, pages 38-73, Palgrave Macmillan.
    2. Daniel Horgos & Klaus Zimmermann, 2009. "Interest groups and economic performance: some new evidence," Public Choice, Springer, vol. 138(3), pages 301-315, March.
    3. William F. Shughart & Robert D. Tollison, 1985. "Legislation and Political Business Cycles," Kyklos, Wiley Blackwell, vol. 38(1), pages 43-59, February.
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    5. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1, July.
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    7. M.G. Quibria, 2006. "Does Governance Matter? Yes, No or Maybe: Some Evidence from Developing Asia," Kyklos, Wiley Blackwell, vol. 59(1), pages 99-114, February.
    8. Klaus Zimmermann & Tobias Just, 2000. "Interest Groups, Referenda, and the Political Process: On the Efficiency of Direct Democracy," Constitutional Political Economy, Springer, vol. 11(2), pages 147-163, June.
    9. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    10. Tollison, Robert D, 2001. "The Interest-Group Theory of Government: Problems and Prospects," Kyklos, Wiley Blackwell, vol. 54(2-3), pages 465-472.
    11. Robert B. Ekelund & Robert D. Tollison, 2001. "The interest-group theory of government," Chapters, in: William F. Shughart II & Laura Razzolini (ed.), The Elgar Companion to Public Choice, chapter 17, Edward Elgar Publishing.
    12. Coates, Dennis & Heckelman, Jac C, 2003. "Interest Groups and Investment: A Further Test of the Olson Hypothesis," Public Choice, Springer, vol. 117(3-4), pages 333-340, December.
    13. William D. Nordhaus, 1975. "The Political Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(2), pages 169-190.
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    Cited by:

    1. Barbara Dluhosch & Nikolai Ziegler, 2011. "The paradox of weakness in the politics of trade integration," Constitutional Political Economy, Springer, vol. 22(4), pages 325-354, December.
    2. Gael Lagadec, 2014. "Are political support-driven policies always bad? The case of large interest groups," European Journal of Government and Economics, Europa Grande, vol. 3(2), pages 138-147, December.
    3. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
    4. Scharfenkamp, Katrin, 2013. "Composition effects of the German Federal Government on the average top income tax burden," Discussion Papers of the Institute for Organisational Economics 2/2013, University of Münster, Institute for Organisational Economics.
    5. Polk Andreas, 2020. "What do we Know About Lobbying in Germany?," Review of Economics, De Gruyter, vol. 71(1), pages 43-79, April.
    6. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    7. Scharfenkamp Katrin, 2016. "It’s About Connections – How the Economic Network of the German Federal Government Affects the Top Earners’ Average Income Tax Rate," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(4), pages 427-453, August.
    8. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.

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    More about this item

    Keywords

    interest groups; political business cycles; growth; unemployment; inflation;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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