The Political Economy of Investment: Sclerotic Effects from Interest Groups

Posted: 3 Jun 2015

See all articles by Dennis Coates

Dennis Coates

University of Maryland, Baltimore County

Jac C. Heckelman

Wake Forest University - Department of Economics

Bonnie Wilson

Saint Louis University - Department of Economics

Date Written: 2010

Abstract

We investigate the relationship between interest group activity and investment by analyzing an unbalanced panel of observations on 126 countries over three time periods. We find that the number of interest groups in a nation is negatively related to investment, consistent with a sclerotic effect due to rent-seeking by interest groups. Our findings are robust to the inclusion of a variety of additional common controls in the specification, to potential outlying observations, and to varied sample-selection procedures. We do find, however, that the sclerotic impact of groups on investment is stronger across developed OECD countries than for the developing non-OECD countries. Effects also tend to be stronger in democratic nations, but are dependent upon how strict a definition of democracy is used.

Keywords: Investment, Institutional sclerosis, Interest groups, Sample-selection bias

JEL Classification: D72, E20, 01

Suggested Citation

Coates, Dennis and Heckelman, Jac C. and Wilson, Bonnie, The Political Economy of Investment: Sclerotic Effects from Interest Groups (2010). European Journal of Political Economy, 26 (2010) 208–221, Available at SSRN: https://ssrn.com/abstract=2613492

Dennis Coates

University of Maryland, Baltimore County ( email )

1000 Hilltop Circle
Baltimore, MD 21250
United States
410-455-3243 (Phone)
410-455-1054 (Fax)

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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