To Be Bribed or Lobbied: Political Control or Regulation

32 Pages Posted: 27 Feb 2023

See all articles by Enrico C. Perotti

Enrico C. Perotti

University of Amsterdam - Finance Group; Centre for Economic Policy Research (CEPR)

Magdalena Rola-Janicka

Imperial College Business School; Finance Theory Group (FTG); Centre for Economic Policy Research (CEPR)

Marcel Vorage

affiliation not provided to SSRN

Abstract

The form of political governance determines the structure of competition among interest groups. A politician choosing direct control of firm entry can be bribed, while regulation based on minimum requirements makes her prone to lobbying. Direct control offers exclusive benefit to the winning group resulting in perfect competition among bribers, so all rents accrue to the politician. Under regulation some agents cannot be excluded from entry, giving their lobby a competitive advantage and allowing them to extract rents at the expense of the politician. If institutional quality is low the politician faces low risk of prosecution and thus prefers being bribed. Unequal distribution of legal power in oligarchic societies may give bargaining power also to bribers, allowing the most powerful individuals to share in political rents.

Keywords: Lobbying, bribing, corruption, competition, inequality

Suggested Citation

Perotti, Enrico C. and Rola-Janicka, Magdalena and Vorage, Marcel, To Be Bribed or Lobbied: Political Control or Regulation. Available at SSRN: https://ssrn.com/abstract=4372090 or http://dx.doi.org/10.2139/ssrn.4372090

Enrico C. Perotti

University of Amsterdam - Finance Group ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands
+31 20 525 4159 (Phone)
+31 20 525 5285 (Fax)

HOME PAGE: http://www.fee.uva.nl/fm/people/pero.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Magdalena Rola-Janicka (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom
07919826557 (Phone)

Finance Theory Group (FTG) ( email )

United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Marcel Vorage

affiliation not provided to SSRN ( email )

No Address Available

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