Privatization, Free Riding, and Industry-Expanding Lobbying
9 Pages Posted: 13 Mar 2007 Last revised: 4 Oct 2013
Date Written: March 2010
Critics of privatization argue that privatization encourages providers to lobby for industry expansion. I argue that this is not generally true when public-sector actors also lobby.
Where the effectiveness of advocacy depends on total expenditures, some initial amount of privatization always decreases industry-expanding advocacy. The extent of privatization for which this no longer holds depends on the total benefits of provision to the public and private-sector actors, as well as the extent of collusion.
Under relaxed assumptions, the effect of privatization on industry-expanding advocacy is ambiguous. The charge that privatization will increase advocacy is unfounded without further empirical development.
Keywords: privatization, political advocacy, lobbying, public sector, unions, collusion
JEL Classification: D21, D43, H11, H41, J45, J51, K23, L11, L13, L21, L32,L 33
Suggested Citation: Suggested Citation