A dynamic model of endogenous interest group sizes and policymaking
We present a dynamic model of endogenous interest group sizes and policymaking. Our model integrates `top-down' (policy) and `bottom-up' (behavioral) influences on the development of interest groups. We show that, for example an increase in the contribution by members of an interest group need not induce larger subsidies to that group, even though it would in case of fixed interest group sizes. This is due to a political participation effect, next to a redistribution effect. On the other hand, the dynamic analysis of the model shows that reliance on equilibrium results such as these can be misleading since equilibria may not be stable. In fact, complicated dynamics may emerge leading to erratic and path dependent time patterns for policy and interest group sizes. We demonstrate that our model can endogenously generate the types of spurts and declines in organizational density that are observed in empirical studies.
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- Dixit, Avinash & Grossman, Gene M. & Helpman, Elhanan, 1997.
"Common Agency and Coordination: General Theory and Application to Government Policy Making,"
3450061, Harvard University Department of Economics.
- Dixit, Avinash & Grossman, Gene M & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 752-69, August.
- Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
- van Winden, Frans, 1999. " On the Economic Theory of Interest Groups: Towards a Group Frame of Reference in Political Economics," Public Choice, Springer, vol. 100(1-2), pages 1-29, July.
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