Policy Reform and the Free Rider Problem

University of Alabama, Department of Economics, Finance and Legal Studies, Working Paper No. 00-05-01

30 Pages Posted: 18 Sep 2000

See all articles by John R. Conlon

John R. Conlon

University of Mississippi - Department of Economics

Paul Pecorino

University of Alabama - Department of Economics, Finance and Legal Studies

Date Written: May 2000

Abstract

We investigate policy reform in a model in which there are both rent seeking and lobbying activities. These two activities involve similar skills, so a reform which reduces rents will cause a shift into lobbying. Also, lobbying is subject to a free-rider problem, so the marginal return to the industry from lobbying may greatly exceed an individual firm's return to lobbying. Thus, the shift into lobbying which results from a reduction in available rents may lead to a large increase in transfers to the lobbying industry. Under some circumstances, it is possible for a reform which reduces available rents to increase the total of rents plus transfers to the industry.

Keywords: Lobbying, Rent Seeking, Reform, Free-Rider Problem

JEL Classification: D72

Suggested Citation

Conlon, John R. and Pecorino, Paul, Policy Reform and the Free Rider Problem (May 2000). University of Alabama, Department of Economics, Finance and Legal Studies, Working Paper No. 00-05-01, Available at SSRN: https://ssrn.com/abstract=237918 or http://dx.doi.org/10.2139/ssrn.237918

John R. Conlon (Contact Author)

University of Mississippi - Department of Economics ( email )

371 Holman Hall
University, MS 38677
United States

Paul Pecorino

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-0379 (Phone)
205-348-0590 (Fax)

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