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Policy persistence and rent extraction

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  • Silke Friedrich

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    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

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    File URL: http://hdl.handle.net/10.1007/s11127-012-9945-9
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    Article provided by Springer in its journal Public Choice.

    Volume (Year): 157 (2013)
    Issue (Month): 1 (October)
    Pages: 287-304

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    Handle: RePEc:kap:pubcho:v:157:y:2013:i:1:p:287-304
    DOI: 10.1007/s11127-012-9945-9
    Contact details of provider: Web page: http://www.springer.com

    Order Information: Web: http://www.springer.com/economics/public+finance/journal/11127/PS2

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