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Lobbying and the Power of Multinational Firms

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  • Polk, Andreas
  • Schmutzler, Armin
  • Müller, Adrian

Abstract

Can multinational firms exert more power than national firms by influencing politics through lobbying? To answer this question, we analyze the extent of national environmental regulation when policy is determined in a lobbying game between a government and firm. We compare the resulting equilibrium regulation levels, outputs and welfare for national and multinational firms, depending on such parameters as the potential environmental damages, transportation costs and the influence of the firm. For low transportation costs, output and pollution of a national firm is always as least as high as for a multinational; this changes for high transportation costs and intermediate damage parameters. When there is no lobbying, welfare levels are always higher with multinationals than with national firms. However, the existence of lobbying may reverse this ordering.

Suggested Citation

  • Polk, Andreas & Schmutzler, Armin & Müller, Adrian, 2013. "Lobbying and the Power of Multinational Firms," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79875, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79875
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    4. Di Ubaldo, Mattia & Gasiorek, Michael, 2022. "Non-trade provisions in trade agreements and FDI," European Journal of Political Economy, Elsevier, vol. 75(C).
    5. Thanh Le & Erkan Yalcin, 2023. "Endogenous expropriation and political competition," Economics and Politics, Wiley Blackwell, vol. 35(1), pages 313-332, March.
    6. Babet Hogetoorn & Michiel Gerritse, 2021. "The impact of terrorism on international mergers and acquisitions: Evidence from firm-level decisions," Journal of Peace Research, Peace Research Institute Oslo, vol. 58(3), pages 523-538, May.
    7. Cieślik Andrzej, 2019. "Determinants of foreign direct investment from EU-15 Countries in Poland," Central European Economic Journal, Sciendo, vol. 6(53), pages 39-52, January.
    8. Friedt, Felix L. & Toner-Rodgers, Aidan, 2022. "Natural disasters, intra-national FDI spillovers, and economic divergence: Evidence from India," Journal of Development Economics, Elsevier, vol. 157(C).
    9. Nieminen, Mika, 2020. "Multidimensional financial development, exporter behavior and export diversification," Economic Modelling, Elsevier, vol. 93(C), pages 1-12.
    10. Catola, Marco & D'Alessandro, Simone, 2020. "Market competition, lobbying influence and environmental externalities," European Journal of Political Economy, Elsevier, vol. 63(C).
    11. Gurshev Oleg, 2019. "What determines foreign direct investment in Russia?," Central European Economic Journal, Sciendo, vol. 53(6), pages 311-322, January.
    12. Thanh Le & Erkan Yalcin, 2023. "Lobbying, political competition and the welfare effect of campaign contribution tax," Scottish Journal of Political Economy, Scottish Economic Society, vol. 70(2), pages 158-179, May.
    13. Michele Sennhauser, 2009. "Why the Linear Utility Function is a Risky Choice in Discrete-Choice Experiments," SOI - Working Papers 1014, Socioeconomic Institute - University of Zurich.
    14. Mateo Ortiz & María‐Ángeles Cadarso & Luis‐Antonio López, 2020. "The carbon footprint of foreign multinationals within the European Union," Journal of Industrial Ecology, Yale University, vol. 24(6), pages 1287-1299, December.
    15. Ortiz, Mateo & Cadarso, María-Ángeles & López, Luis-Antonio & Jiang, Xuemei, 2022. "The trade-off between the economic and environmental footprints of multinationals’ foreign affiliates," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 85-97.
    16. Le, Thanh & Yalcin, Erkan, 2018. "Lobbying, campaign contributions, and electoral competition," European Journal of Political Economy, Elsevier, vol. 55(C), pages 559-572.
    17. Annicchiarico, Barbara & Marvasi, Enrico, 2019. "Protection for sale under monopolistic competition: Beyond the CES," European Journal of Political Economy, Elsevier, vol. 60(C).
    18. Marco Catola & Silvia Leoni, 2023. "Pollution Abatement and Lobbying in a Cournot Game. An Agent-Based Modelling approach," Discussion Papers 2023/294, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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