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Does Centralization Affect the Number and Size of Lobbies?

  • Michela Redoano

Previous research has shown that if countries “merge”, (i.e. move to centralized policy choices) the effect is to reduce lobbying. However empirical evidence suggests that this is not always the case. This paper attempts to explain the empirical evidence in a two-jurisdiction political economy model of endogenous lobby formation and policy determination. We measure lobbying in two ways: (i) the number of lobbies formed under the two settings and, (ii) their impact on policy decisions. We show that preference heterogeneity and lobby formation are positively related and that moving from decentralization to centralization can affect both the number and the type of lobbies. Under decentralization, if lobbies form they will always have an effect on policy decision. Under centralization, if lobbies form, lobby competition may completely offset their influence on policy; however it is possible that the threat of lobbying may affect policy even when no lobby forms in equilibrium. Finally, when lobbying affects policy (even if no lobby forms in equilibrium), the political equilibrium is always more moderate than the one where lobbying is not taken into account.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1968.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_1968
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  2. Leonardo Felli & Antonio Merlo, 2001. "Endogenous Lobbying," PIER Working Paper Archive 04-043, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Oct 2004.
  3. Tim Besley & Stephen Coate, . ""An Economic Model of Representative Democracy''," CARESS Working Papres 95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
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  17. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
  18. Besley, Timothy & Coate, Stephen, 2001. "Lobbying and Welfare in a Representative Democracy," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 67-82, January.
  19. 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.
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