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Policy persistence and rent extraction

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  • Silke Friedrich

Abstract

The existing literature has shown that special interest groups can have both growth enhancing and growth retarding effects on an economy. In either case, it is always assumed that the nature of the special interest groups remains constant over time. The hypothesis of this paper is that a dynamic relationship exists between politicians and lobbyists, i.e., that opportunities for rent extraction for special interest groups can evolve over time. In the short run politicians may support “projects” proposed to them by lobbies, because they yield clear economic benefits. However, continued governmental support may imply a cost to society and yield rents to the lobbies. A theoretical framework in which established and new lobbies overlap is developed to model a government’s incentives to behave in a manner consistent with the hypothesis. In this framework, voters can still rationally reelect politicians even if the latter support lobbies for an inefficiently long period of time, because if they did not, then the quality of the pool of new projects would deteriorate. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Silke Friedrich, 2013. "Policy persistence and rent extraction," Public Choice, Springer, vol. 157(1), pages 287-304, October.
    • Handle: RePEc:kap:pubcho:v:157:y:2013:i:1:p:287-304
    DOI: 10.1007/s11127-012-9945-9
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    Cited by:

    1. Wilkening, Tom, 2016. "Information and the persistence of private-order contract enforcement institutions: An experimental analysis," European Economic Review, Elsevier, vol. 89(C), pages 193-215.
    2. Silke Friedrich, 2013. "Policy persistence and rent extraction," Public Choice, Springer, vol. 157(1), pages 287-304, October.
    3. Warren, Patrick L. & Wilkening, Tom S., 2012. "Regulatory fog: The role of information in regulatory persistence," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 840-856.
    4. Christian Grimme & Steffen Henzel & Elisabeth Wieland, 2014. "Inflation uncertainty revisited: a proposal for robust measurement," Empirical Economics, Springer, vol. 47(4), pages 1497-1523, December.
    5. Silke Friedrich, 2013. "Policy Persistence and Rent Extraction," CESifo Working Paper Series 4325, CESifo.

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    More about this item

    Keywords

    Lobby; Special interest; Efficiency; Elections; D72;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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