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Externalities in the rent-seeking strategies of lobbying and bribery

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  • Abbas Khandan

    (Department of Economics, Kharazmi University, Tehran, Iran)

Abstract

Studies investigating the relationship between lobbying and bribery are limited and contradictory. Some studies regard lobbying and bribery as substitutes while others consider them complementary strategies. Using congestion games this study attempts to clarify the externalities present in these rent-seeking strategies which generate complementarities between them. Lobbying cost-sharing and cooperation through business associations and congestion in benefits from competitive bribery are important sources of externalities. The theoretical model is then investigated empirically. The results indicate that lobbying and bribery are complementary strategies. However, as countries grow, lobbying will be used more intensely. The results also show that there is a positive externality in collective lobbying so that firms that cooperate can save on lobbying costs. There are also externalities in competitive bribery. The results show that the effects of social and legal punishments of bribery are considerable but become less severe as corruption becomes more widespread.

Suggested Citation

  • Abbas Khandan, 2022. "Externalities in the rent-seeking strategies of lobbying and bribery," Public Sector Economics, Institute of Public Finance, vol. 46(3), pages 421-450.
    • Handle: RePEc:ipf:psejou:v:46:y:2022:i:3:p:421-450
    DOI: 10.3326/pse.46.3.5
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    References listed on IDEAS

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    Cited by:

    1. Petr Wawrosz, 2022. "How Corruption Is and Should Be Investigated by Economic Theory," Economies, MDPI, vol. 10(12), pages 1-23, December.

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    More about this item

    Keywords

    lobbying; bribery; congestion games;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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