Lobbying, Inside and Out: How Special Interest Groups Influence Policy Choices

Abstract

Special interest groups (SIGs) have multiple channels of influence: contributing to decision-makers or providing them with information (henceforth, inside lobbying) and grassroots mobilizations or advertising their position to voters (henceforth, outside lobbying). How do these channels interact? I study a signaling model in which a politician chooses the scope of a reform, two SIGs, one defending the status quo, the other pushing for change, use inside lobbying to bias the content of the proposed policy and outside lobbying to affect its fate. In equilibrium, inside lobbying expenditures are associated with policy compromises, a mark of influence of the SIG supportive of the status quo; meanwhile, outside lobbying activities are associated with comprehensive reforms, a sign of pro-change SIG power. I discuss how these findings can potentially inform the empirical research on SIG influence.

Keywords: special interest group, inside lobbying, outside lobbying, power, threat, promise

JEL Classification: D70, D72, D74, D78, D82