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To Ban or Not to Ban: Foreign Lobbying and Cross National Externalities

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  • Toke Aidt
  • Uk Hwang

Abstract

This paper studies the costs and benefits of foreign lobbying. We show how and when foreign lobbying can help internalize cross national externalities. We argue that this is an often overlooked benefit of foreign lobbying. We also study under what conditions a constitutional rule banning foreign lobbying is in the national interest of a country. A key factor in this calculus is whether the interests of foreign lobby groups and domestic unorganized groups coincide or not. We illustrate the logic with examples from trade policy and environmental regulation.

Suggested Citation

  • Toke Aidt & Uk Hwang, 2014. "To Ban or Not to Ban: Foreign Lobbying and Cross National Externalities," Cambridge Working Papers in Economics 1402, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1402
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    References listed on IDEAS

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    1. Aidt, Toke S. & Albornoz, Facundo, 2011. "Political regimes and foreign intervention," Journal of Development Economics, Elsevier, vol. 94(2), pages 192-201, March.
    2. Giovanni Facchini & Johannes Van Biesebroeck & Gerald Willmann, 2006. "Protection for sale with imperfect rent capturing," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 845-873, August.
    3. Andrea Prat & Aldo Rustichini, 2003. "Games Played Through Agents," Econometrica, Econometric Society, vol. 71(4), pages 989-1026, July.
    4. Damania, Richard & Fredriksson, Per G., 2007. "Trade policy: What's welfare got to do with it?," Economics Letters, Elsevier, vol. 96(1), pages 64-69, July.
    5. Hotte, Louis & Winer, Stanley L., 2012. "Environmental regulation and trade openness in the presence of private mitigation," Journal of Development Economics, Elsevier, vol. 97(1), pages 46-57.
    6. Long, Ngo Van & Stähler, Frank, 2009. "A contest model of liberalizing government procurements," European Journal of Political Economy, Elsevier, vol. 25(4), pages 479-488, December.
    7. Roberto Bonfatti, 2017. "An economic theory of foreign interventions and regime change," Canadian Journal of Economics, Canadian Economics Association, vol. 50(1), pages 306-339, February.
    8. Larry Qiu, 2004. "Lobbying, multisector trade, and sustainability of free-trade agreements," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 1061-1083, November.
    9. Conconi, Paola, 2003. "Green lobbies and transboundary pollution in large open economies," Journal of International Economics, Elsevier, vol. 59(2), pages 399-422, March.
    10. Kee, Hiau Looi & Olarreaga, Marcelo & Silva, Peri, 2007. "Market access for sale," Journal of Development Economics, Elsevier, vol. 82(1), pages 79-94, January.
    11. Toke S. Aidt & Uk Hwang, 2008. "On the Internalization of Cross-National Externalities through Political Markets: The Case of Labour Standards," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(3), pages 509-533, September.
    12. Facundo Albornoz & Sebastian Galiani & Daniel Heymann, 2012. "Foreign investment and expropriation under oligarchy and democracy," Economics and Politics, Wiley Blackwell, vol. 24(1), pages 24-46, March.
    13. Steven Husted, 1991. "Foreign Lobbying: A Theoretical Analysis," Eastern Economic Journal, Eastern Economic Association, vol. 17(1), pages 89-99, Jan-Mar.
    14. Per Fredriksson & Daniel Millimet, 2007. "Legislative Organization and Pollution Taxation," Public Choice, Springer, vol. 131(1), pages 217-242, April.
    15. Aidt, Toke S., 2010. "Green taxes: Refunding rules and lobbying," Journal of Environmental Economics and Management, Elsevier, vol. 60(1), pages 31-43, July.
    16. Paldam, Martin, 2002. "The cross-country pattern of corruption: economics, culture and the seesaw dynamics," European Journal of Political Economy, Elsevier, vol. 18(2), pages 215-240, June.
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    Citations

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    Cited by:

    1. Mathilde Lebrand, 2016. "Profit Shifting and FDI Restrictions," CESifo Working Paper Series 5885, CESifo Group Munich.
    2. repec:eee:jcecon:v:46:y:2018:i:1:p:157-173 is not listed on IDEAS
    3. Fünfgelt, Joachim & Schulze, Günther G., 2016. "Endogenous environmental policy for small open economies with transboundary pollution," Economic Modelling, Elsevier, vol. 57(C), pages 294-310.
    4. Thomas Groll & Anja Prummer, 2016. "Whom to Lobby? Targeting in Political Networks," Working Papers 808, Queen Mary University of London, School of Economics and Finance.
    5. Pierre Fauvet & Sébastien Rouillon, 2016. "Would you trust lobbies?," Public Choice, Springer, vol. 167(3), pages 201-219, June.
    6. Yu-Bong Lai, 2016. "Does Tax Competition Reduce Corruption?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(4), pages 331-356, September.

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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