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Interest Group Politics in a Federation

Author

Listed:
  • Sergei Guriev

    (NES - New Economic School - NES, CEFIR - Center for Economic and Financial Research - CEFIR, CEPR - Center for Economic Policy Research)

  • Evgeny Yakovlev

    (LBNL - Lawrence Berkeley National Laboratory [Berkeley])

  • Ekaterina Zhuravskaya

    (NES - New Economic School - NES, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by the spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state externalities to a larger extent than the lobbyists with interests within a single state. We use variation in the geographic boundaries of politically-powerful industrial interests to estimate the effect of inter-state externalities on firm performance. Using firm-level panel data from a peripheralized federation, Russia in 1996-2003, we show that, controlling for firm fixed effects, the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi-regional business groups compared to the number influenced by local business groups. Our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter-state externalities.

Suggested Citation

  • Sergei Guriev & Evgeny Yakovlev & Ekaterina Zhuravskaya, 2010. "Interest Group Politics in a Federation," PSE-Ecole d'économie de Paris (Postprint) halshs-00754421, HAL.
    • Handle: RePEc:hal:pseptp:halshs-00754421
    DOI: 10.1016/j.jpubeco.2010.04.004
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    Cited by:

    1. Suzuki, Taku & Mizobata, Satoshi, 2019. "Social Confusion and Corruption: Investigating the Causes and Effects of a Breakdown of Ethics," Discussion Paper Series 690_v2, Institute of Economic Research, Hitotsubashi University.
    2. Jussila Hammes , Johanna & Nilsson, Jan-Eric, 2015. "The allocation of transport infrastructure in Swedish municipalities: welfare maximization, political economy or both?," Working papers in Transport Economics 2015:4, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    3. Sokolov, Vladimir & Solanko, Laura, 2016. "Political influence, firm performance and survival," BOFIT Discussion Papers 20/2016, Bank of Finland Institute for Emerging Economies (BOFIT).
    4. Lidwina Gundacker & Jarko Fidrmuc, 2017. "Oligarchs and social capital in Russian regions: a quantitative assessment," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(3), pages 509-527, August.
    5. Sokolov, Vladimir & Solanko, Laura, 2016. "Political influence, firm performance and survival," BOFIT Discussion Papers 20/2016, Bank of Finland, Institute for Economies in Transition.
    6. Libman, Alexander, 2013. "Natural resources and sub-national economic performance: Does sub-national democracy matter?," Energy Economics, Elsevier, vol. 37(C), pages 82-99.
    7. William Pyle & Laura Solanko, 2013. "The composition and interests of Russia’s business lobbies: testing Olson’s hypothesis of the “encompassing organization”," Public Choice, Springer, vol. 155(1), pages 19-41, April.
    8. Irina N. Ilina & Carol S. Leonard & Evgenij E. Plisetskij, 2014. "Russian Regional Resilience: Finance, Cooperation And Resource Abundance (A Case Study Of Khanty-Mansiysk)," HSE Working papers WP BRP 15/PA/2014, National Research University Higher School of Economics.
    9. Pyle, William & Solanko, Laura, 2010. "The composition and interests of Russia's business lobbies : A test of Olson's "encompassing organization" hypothesis," BOFIT Discussion Papers 5/2010, Bank of Finland, Institute for Economies in Transition.
    10. Hui Jin & Fu-Sheng Tsai & Jorge Martinez-Vazquez, 2025. "Optimal expenditure decentralization for sustainable development: evidence from a 52-country panel analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 11(1), pages 1-29, December.
    11. Kvartiuk, Vasyl & Herzfeld, Thomas, 2021. "Redistributive politics in Russia: The political economy of agricultural subsidies," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 63(1), pages 1-30.
    12. Suesse, Marvin, 2019. "Adjusting the size of nations: Empirical determinants of separatism and the Soviet breakup," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 50-64.
    13. Irina Ilina & Carol Scott Leonard & Evgenij Pliseckij, 2014. "Modern trends and risks in the development of resource regions of Russia," ERSA conference papers ersa14p1111, European Regional Science Association.
    14. Andrei Govorun & Israel Marques & William Pyle, 2013. "The political roots of intermediated lobbying: evidence from Russian firms and business associations," HSE Working papers WP BRP 46/EC/2013, National Research University Higher School of Economics.
    15. Markevich, Andrei & Zhuravskaya, Ekaterina, 2011. "M-form hierarchy with poorly-diversified divisions: A case of Khrushchev's reform in Soviet Russia," Journal of Public Economics, Elsevier, vol. 95(11), pages 1550-1560.
    16. Antràs, Pol & Padró i Miquel, Gerard, 2011. "Foreign influence and welfare," Journal of International Economics, Elsevier, vol. 84(2), pages 135-148, July.
    17. Raúl Alberto Ponce Rodríguez, 2018. "Campaign contributions and local public goods in a federation," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 33(2), pages 283-311.
    18. Govorun, Andrei & Marques, Israel & Pyle, William, 2016. "The political roots of intermediated lobbying: evidence from Russian enterprises and business associations," Business and Politics, Cambridge University Press, vol. 18(4), pages 395-433, December.
    19. Vasyl Kvartiuk & Thomas Herzfeld, 2023. "Why Do Farmers Seek Office? Regulatory Capture in Russian Agricultural Subsidization," Eastern European Economics, Taylor & Francis Journals, vol. 61(2), pages 111-130, March.

    More about this item

    Keywords

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    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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