Entry and Asymmetric Lobbying: Why Governments Pick Losers
32 Pages Posted: 28 Jul 2006
There are 2 versions of this paper
Entry and Asymmetric Lobbying: Why Governments Pick Losers
Date Written: May 2006
Abstract
Governments frequently intervene to support domestic industries, but a surprising amount of this support goes to ailing sectors. We explain this with a lobbying model that allows for entry and sunk costs. Specifically, policy is influenced by pressure groups that incur lobbying expenses to create rents. In expanding industry, entry tends to erode such rents, but in declining industries, sunk costs rule out entry as long as the rents are not too high. This asymmetric appropriability of rents means losers lobby harder. Thus it is not that government policy picks losers, it is that losers pick government policy.
Keywords: Lobbying, sunk costs, sunset industries
JEL Classification: H32, P16
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Major Trade Trends in East Asia: What are Their Implications for Regional Cooperation and Growth?
By Francis Ng and Alexander J. Yeats
-
Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade
-
Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade
-
The Political Economy of Declining Industries: Senescent Industry Collapse Revisited
By S. Lael Brainard and Thierry Verdier
-
Managing the Noodle Bowl: The Fragility of East Asian Regionalism
-
The Formation of International Production and Distribution Networks in East Asia
By Mitsuyo Ando and Fukunari Kimura
-
Beyond the WTO? An Anatomy of EU and US Preferential Trade Agreements
By Henrik Horn, Petros C. Mavroidis, ...