Privatization, free riding, and industry-expanding lobbying
Critics of privatization argue that privatization encourages providers to lobby for industry expansion. I argue that this is not generally true when public-sector actors also lobby. Where the effectiveness of advocacy depends on total expenditures, some initial amount of privatization always decreases industry-expanding advocacy. The extent of privatization for which this no longer holds depends on the total benefits of provision to the public and private-sector actors, as well as the extent of collusion. Under relaxed assumptions, the effect of privatization on industry-expanding advocacy is ambiguous. The charge that privatization will increase advocacy is unfounded without further empirical development.
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