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Insuring legislative wealth transfers: theory and evidence

Author

Listed:
  • Bryan P. Cutsinger

    (Angelo State University)

  • Alexander Marsella

    (West Virginia University)

  • Yang Zhou

    (University of North Texas)

Abstract

The interest group theory of government assumes that the state’s primary purpose is to facilitate wealth transfers between special interests. The values of the transfers depend on their durability, which can be increased by mechanisms that raise the cost of repealing them. Nonetheless, such mechanisms cannot function perfectly, and, thus, uncertainty surrounding their durability remains. We argue that the uncertainty could be mitigated by an insurance mechanism that compensates interest groups if other durability-enhancing mechanisms fail. To illustrate how such an insurance mechanism works, we rely on the 2014 settlements between the Department of Justice and Bank of America and Citigroup, respectively, which required both banks to donate to housing-counseling organizations whose funding Congress had reduced three years earlier.

Suggested Citation

  • Bryan P. Cutsinger & Alexander Marsella & Yang Zhou, 2022. "Insuring legislative wealth transfers: theory and evidence," Public Choice, Springer, vol. 192(1), pages 127-144, July.
    • Handle: RePEc:kap:pubcho:v:192:y:2022:i:1:d:10.1007_s11127-022-00975-5
    DOI: 10.1007/s11127-022-00975-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Durability; Interest groups; Political exchange;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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