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Institutions, Lobbying, and Economic Performance

Author

Listed:
  • 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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    File URL: http://www.slu-econ-wp.com/RePEc/slu/bonnie_wilson/EF_lobby_h.pdf
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    Cited by:

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    2. Demet Yalcin Mousseau, 2023. "Can governments prevent ethnic violence through public goods spending? A cross‐country investigation," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(7), pages 1925-1941, October.
    3. Heckelman, Jac C. & Wilson, Bonnie, 2025. "Aid, Reform, and Interest groups," European Journal of Political Economy, Elsevier, vol. 90(PB).
    4. Ismail M. Cole, 2023. "The political economy triangle of government spending, interest‐group influence, and income inequality: Evidence and implications from the US states," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 1122-1176, November.
    5. Óscar Afonso & Pedro G. Lima & Tiago Sequeira, 2022. "The effects of automation and lobbying in wage inequality: a directed technical change model with routine and non-routine tasks," Journal of Evolutionary Economics, Springer, vol. 32(5), pages 1467-1497, November.
    6. Heckelman, Jac C. & Wilson, Bonnie, 2019. "The growth-maximizing level of regulation: Evidence from a panel of international data," European Journal of Political Economy, Elsevier, vol. 59(C), pages 354-368.
    7. Richard Cothren & Ravi Radhakrishnan, 2018. "Productivity growth and welfare in a model of allocative inefficiency," Journal of Economics, Springer, vol. 123(3), pages 277-298, April.
    8. Castelnovo, Paolo & Del Bo, Chiara F. & Florio, Massimo, 2019. "Quality of institutions and productivity of State-Invested Enterprises: International evidence from major telecom companies," European Journal of Political Economy, Elsevier, vol. 58(C), pages 102-117.

    More about this item

    Keywords

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    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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