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Inefficient lobbying, populism and oligarchy

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  • Francisco H. G. Ferreira

    () (World Bank and Department of Economics PUC-Rio)

  • Filipe Campante

    () (Harvard University)

Abstract

This paper analyses the efficiency consequences of lobbying in a production economy with imperfect commitment. We first show that the Pareto efficiency result found for truthful equilibria of common agency games in static exchange economies no longer holds under these more general conditions. We construct a model of pressure groups where the set of e.cient truthful common-agency equilibria has measure zero. Equilibria are generally inefficient as a direct result of the existence of groups with conflicting interests, which allocate real resources to lobbying. If lobbies representing "the poor " and "the rich " have identical organizational capacities, we show that these equilibria are biased towards the poor, who have a comparative advantage in politics, rather than in production. If the pressure groups di.er in their organizational capacity, both pro-rich (oligarchic) and pro-poor (populist) equilibria may arise, all of which are inefficient with respect to the constrained optimum.

Suggested Citation

  • Francisco H. G. Ferreira & Filipe Campante, 2004. "Inefficient lobbying, populism and oligarchy," Textos para discussão 483, Department of Economics PUC-Rio (Brazil).
  • Handle: RePEc:rio:texdis:483
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    Cited by:

    1. Mejia, Daniel & Posada, Carlos-Esteban, 2007. "Populist policies in the transition to democracy," European Journal of Political Economy, Elsevier, vol. 23(4), pages 932-953, December.
    2. Elbers, Chris & Fujii, Tomoki & Lanjouw, Peter & Ozler, Berk & Yin, Wesley, 2007. "Poverty alleviation through geographic targeting: How much does disaggregation help?," Journal of Development Economics, Elsevier, vol. 83(1), pages 198-213, May.
    3. Christian Roessler & Sandro Shelegia & Bruno Strulovici, 2018. "Collective Commitment," Journal of Political Economy, University of Chicago Press, vol. 126(1), pages 347-380.
    4. Sebastian Miller, 2011. "Why Do Populist-Outsiders Get Elected? A Model of Strategic Populists," Research Department Publications 4716, Inter-American Development Bank, Research Department.
    5. Andrei Govorun, 2013. "The choice of lobbying strategy: direct contacts with officials or mediation via business associations," HSE Working papers WP BRP 24/EC/2013, National Research University Higher School of Economics.
    6. Ferreira, Francisco H. G. & Lakner, Christoph & Lugo, Maria Ana & Özler, Berk, 2014. "Inequality of Opportunity and Economic Growth: A Cross-Country Analysis," IZA Discussion Papers 8243, Institute for the Study of Labor (IZA).
    7. Daniel Kaufmann & Pedro C. Vicente, 2011. "Legal Corruption," Economics and Politics, Wiley Blackwell, vol. 23(2), pages 195-219, July.
    8. Zhang, Lei, 2008. "Political economy of income distribution dynamics," Journal of Development Economics, Elsevier, vol. 87(1), pages 119-139, August.
    9. Safarzynska, Karolina & van den Bergh, Jeroen C.J.M., 2010. "Evolving power and environmental policy: Explaining institutional change with group selection," Ecological Economics, Elsevier, vol. 69(4), pages 743-752, February.
    10. Boultzis, Ilias, 2015. "Common agency with caring agents," Economics Letters, Elsevier, vol. 126(C), pages 71-74.
    11. Martimort, David & Semenov, Aggey, 2008. "Ideological uncertainty and lobbying competition," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 456-481, April.
    12. Lima, Rafael Costa & Moreira, Humberto, 2014. "Information transmission and inefficient lobbying," Games and Economic Behavior, Elsevier, vol. 86(C), pages 282-307.
    13. Chris Y. Tung & C. C. Yang, 2014. "Repeated Protection for Sale," Pacific Economic Review, Wiley Blackwell, vol. 19(4), pages 466-482, October.
    14. repec:kap:theord:v:83:y:2017:i:1:d:10.1007_s11238-017-9587-y is not listed on IDEAS

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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