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The Politics of Growth: Can Lobbying Raise Growth and Welfare?

Listed author(s):
  • Julio, Paulo

This paper aims at analyzing the e ects of lobbying over economic growth and primarily welfare. We model explicitly the interaction be- tween policy-makers and rms in a setup where the latter undertakes political contributions to the former in exchange for more restrictive market regulations which induce exit and enhance the pro tability of the market. In a sectorial equilibrium, despite stimulating growth, lobbying restricts the market structure and reduces welfare when com- pared to the free-entry outcome. However, once general equilibrium considerations are taken into account, we nd that lobbying may im- prove welfare over a welfare maximizing free-entry equilibrium, by means of an expansion in aggregate demand. This introduces a new paradigm in the literature about the e ects of lobbying over economic performance. JEL codes: D72, L13, O31

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Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp542.

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Length: 52 pages
Date of creation: 2009
Handle: RePEc:unl:unlfep:wp542
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