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Measuring political information rents: Evidence from the European agricultural reform

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  • Grüner, Hans Peter
  • Muller, Daniel

Abstract

This paper develops a method to estimate information rents – the difference between the actual compensation and the true willingness to accept – of losers of a reform who receive a monetary compensation. Our method explicitly accounts for survey respondents' reluctance to reveal a willingness to accept which is smaller than the actual compensation. We apply our approach to the case of the 2005 European agricultural reform using uniquely gathered survey data from farmers in Lower Saxony, Germany. We find empirical indications for strategic misreporting. Correcting for these effects with a structural model, we find that information rents are in the order of up to 14% of total compensation paid. Moreover, we show that the reform could not have been implemented distinctly cheaper by conditioning compensation schemes on observable factors.

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  • Grüner, Hans Peter & Muller, Daniel, 2016. "Measuring political information rents: Evidence from the European agricultural reform," European Journal of Political Economy, Elsevier, vol. 43(C), pages 107-126.
    • Handle: RePEc:eee:poleco:v:43:y:2016:i:c:p:107-126
    DOI: 10.1016/j.ejpoleco.2016.03.003
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    Cited by:

    1. Fałkowski, Jan, 2016. "Promoting change or preserving the status quo? - the consequences of dominating local politics by agricultural interests. Some evidence on structural change in Poland during the transition period," 149th Seminar, October 27-28, 2016, Rennes, France 245115, European Association of Agricultural Economists.

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    More about this item

    Keywords

    Information rents; European agricultural reform;

    JEL classification:

    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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