Institutions, Lobbying, and Economic Performance

Economics & Politics, November 2013, 25: 360-386

33 Pages Posted: 3 Jun 2015

See all articles by Jac C. Heckelman

Jac C. Heckelman

Wake Forest University - Department of Economics

Bonnie Wilson

Saint Louis University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 2013

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.

Keywords: economic freedom, institutions, lobbying, special-interest groups, growth

JEL Classification: D72, H10

Suggested Citation

Heckelman, Jac C. and Wilson, Bonnie, Institutions, Lobbying, and Economic Performance (November 2013). Economics & Politics, November 2013, 25: 360-386, Available at SSRN: https://ssrn.com/abstract=2613488

Jac C. Heckelman

Wake Forest University - Department of Economics ( email )

P.O. Box 7505
Winston-Salem, NC 27109
United States
(336) 758-5923 (Phone)
(336) 758-6028 (Fax)

HOME PAGE: http://www.wfu.edu/~heckeljc/jac.htm

Bonnie Wilson (Contact Author)

Saint Louis University - Department of Economics ( email )

3674 Lindell Boulevard
Saint Louis, MO 63108
United States

HOME PAGE: http://https://sites.google.com/a/slu.edu/bonnie_wilson/

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