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Institutions, Lobbying, and Economic Performance

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  • Bonnie Wilson

    (Department of Economics, Saint Louis University)

  • Jac Heckelman

    (Department of Economics, Wake Forest University)

Abstract

We investigate whether the impact of institutions depends not just on their current state, but also on how they came to be. In particular, we hypothesize that while economic freedom that emerges spontaneously may be growth promoting, economic freedom that emerges as a result of costly lobbying efforts may be less fruitful. In an extreme case, costly lobbying efforts may even negate the growth-enhancing effect of economic freedom. To the extent that lobbying efforts constitute an opportunity cost of resources diverted away from investment and production, our hypothesis also implies that the opportunity cost of lobbying is greater the more efficient is the institutional environment. Panel data analysis reveals the expected positive relation between economic freedom and growth, and consistent with our hypothesis, the findings indicate that the impact of economic freedom on growth does indeed diminish as lobbying efforts increase. In addition, we find that lobbying is more harmful to growth at greater levels of economic freedom.

Suggested Citation

  • Bonnie Wilson & Jac Heckelman, 2012. "Institutions, Lobbying, and Economic Performance," Working Papers 2012-02, Saint Louis University, Department of Economics.
  • Handle: RePEc:slu:wpaper:2012-02
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    3. Heckelman, Jac C & Wilson, Bonnie, 2023. "Aid, Reform, and Interest Groups," MPRA Paper 118182, University Library of Munich, Germany.
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    More about this item

    Keywords

    economic freedom; institutions; lobbying; special-interest groups; growth;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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