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Interest Groups and Economic Performance: Some New Evidence

Author

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  • Zimmermann, Klaus W.

    () (Helmut Schmidt University, Hamburg)

  • Horgos, Daniel

    () (Helmut Schmidt University, Hamburg)

Abstract

Mancur Olson's theory of the decline of nations is path-breaking in political economics. It has been tested cross-sectionally in numerous empirical studies. We survey the existing results briefly, with a special focus on studies using the number of lobbies as an exogenous variable. Using data from the period 1973-2006, we then present the field's first time-series analysis of the effects of the number of interest groups on the German lobby list and macroeconomic performance, gauged in terms of economic growth and inflation. The number of interest groups (as a proxy for their influence) is shown to have an important impact on macrovariables: Interest group activity significantly leads to a decline in the growth rate and a rise in the inflation rate.

Suggested Citation

  • Zimmermann, Klaus W. & Horgos, Daniel, 2008. "Interest Groups and Economic Performance: Some New Evidence," Working Paper 84/2008, Helmut Schmidt University, Hamburg.
  • Handle: RePEc:ris:vhsuwp:2008_084
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    References listed on IDEAS

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    1. Martin C. McGuire & Mancur Olson Jr., 1996. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 72-96, March.
    2. Stefan Josten & Klaus Zimmermann, 2005. "Unanimous constitutional consent and the immigration problem," Public Choice, Springer, vol. 125(1), pages 151-170, July.
    3. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
    4. Nauro Campos & Francesco Giovannoni, 2007. "Lobbying, corruption and political influence," Public Choice, Springer, vol. 131(1), pages 1-21, April.
    5. Olson, Mancur, Jr, 1995. "The Devolution of the Nordic and Teutonic Economies," American Economic Review, American Economic Association, vol. 85(2), pages 22-27, May.
    6. Coates, Dennis & Heckelman, Jac C, 2003. "Interest Groups and Investment: A Further Test of the Olson Hypothesis," Public Choice, Springer, vol. 117(3-4), pages 333-340, December.
    7. Bischoff, Ivo, 2003. "Determinants of the Increase in the Number of Interest Groups in Western Democracies: Theoretical Considerations and Evidence from 21 OECD Countries," Public Choice, Springer, vol. 114(1-2), pages 197-218, January.
    8. Heckelman, Jac C, 2000. "Consistent Estimates of the Impact of Special Interest Groups on Economic Growth," Public Choice, Springer, vol. 104(3-4), pages 319-327, September.
    9. Clark Nardinelli & Myles Wallace & John Warner, 1987. "Explaining differences in state growth: Catching up versus Olson," Public Choice, Springer, vol. 52(3), pages 201-213, January.
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    Cited by:

    1. Axel Dreher & Lars-H. Siemers, 2009. "The nexus between corruption and capital account restrictions," Public Choice, Springer, vol. 140(1), pages 245-265, July.
    2. Castanheira, Micael & Nicodème, Gaëtan & Profeta, Paola, 2011. "On the political economics of tax reforms," CEPR Discussion Papers 8507, C.E.P.R. Discussion Papers.
    3. 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.
    4. Javier A. Prado Domínguez & Antonio García Lorenzo, 2010. "Competencia e incentivos a la cooperación en la interacción de grupos de interés que pretenden aumentar su influencia política directa: ¿cuál es la importancia de la presión política?," Hacienda Pública Española, IEF, vol. 192(1), pages 105-125, March.
    5. Dennis Coates & Jac Heckelman & Bonnie Wilson, 2011. "Special-interest groups and growth," Public Choice, Springer, vol. 147(3), pages 439-457, June.
    6. Nuria Boch Roca & Javier Suárez Pandiello, 2015. "Politics and Finance in Spanish Municipalities," Hacienda Pública Española, IEF, vol. 212(1), pages 51-66, March.
    7. Daniel Horgos & Klaus W. Zimmermann, 2010. "It Takes Two to Tango: Lobbies and the Political Business Cycle," Kyklos, Wiley Blackwell, vol. 63(3), pages 383-399, August.
    8. Polk, Andreas, 2017. "Lobbyism in Germany: What do we know?," Beiträge zur Jahrestagung 2016 (Witten/Herdecke) 175190, Verein für Socialpolitik, Ausschuss für Wirtschaftssysteme und Institutionenökonomik.
    9. Cole, Ismail M., 2014. "Short- and long-term growth effects of special interest groups in the U.S. states: A dynamic panel error-correction approach," MPRA Paper 54455, University Library of Munich, Germany, revised 02 Mar 2014.
    10. John M. de Figueiredo & Brian Kelleher Richter, 2013. "Advancing the Empirical Research on Lobbying," NBER Working Papers 19698, National Bureau of Economic Research, Inc.
    11. Gael Lagadec, 2014. "Are political support-driven policies always bad? The case of large interest groups," European Journal of Government and Economics, Europa Grande, vol. 3(2), pages 138-147, December.
    12. Domenico Rossignoli, 2015. "Too many and too much? Special-interest groups and inequality at the turn of the century," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 130(3), pages 337-366.
    13. Taner Güney, 2015. "Environmental sustainability and pressure groups," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(6), pages 2331-2344, November.

    More about this item

    Keywords

    Interest groups; economic performance; growth rate; inflation rate;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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