The Politics of Growth: Can Lobbying Raise Growth and Welfare?
AbstractThis paper aims at analyzing the e ects of lobbying over economic growth and primarily welfare. We model explicitly the interaction be- tween policy-makers and rms in a setup where the latter undertakes political contributions to the former in exchange for more restrictive market regulations which induce exit and enhance the pro tability of the market. In a sectorial equilibrium, despite stimulating growth, lobbying restricts the market structure and reduces welfare when com- pared to the free-entry outcome. However, once general equilibrium considerations are taken into account, we nd that lobbying may im- prove welfare over a welfare maximizing free-entry equilibrium, by means of an expansion in aggregate demand. This introduces a new paradigm in the literature about the e ects of lobbying over economic performance. JEL codes: D72, L13, O31
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Bibliographic InfoPaper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp542.
Length: 52 pages
Date of creation: 2009
Date of revision:
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Web page: http://www.fe.unl.pt
Other versions of this item:
- Paulo Júlio, 2010. "The Politics of Growth: Can Lobbying Raise Growth and Welfare?," GEE Papers 0031, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Dec 2010.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-MIC-2009-10-24 (Microeconomics)
- NEP-POL-2009-10-24 (Positive Political Economics)
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