Does Centralization Affect the Number and Size of Lobbies?

35 Pages Posted: 2 May 2007

See all articles by Michela Redoano

Michela Redoano

University of Warwick - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 2007

Abstract

Previous research has shown that if countries "merge", (i.e. move to centralized policy choices) the effect is to reduce lobbying. However empirical evidence suggests that this is not always the case. This paper attempts to explain the empirical evidence in a two-jurisdiction political economy model of endogenous lobby formation and policy determination. We measure lobbying in two ways: (i) the number of lobbies formed under the two settings and, (ii) their impact on policy decisions. We show that preference heterogeneity and lobby formation are positively related and that moving from decentralization to centralization can affect both the number and the type of lobbies. Under decentralization, if lobbies form they will always have an effect on policy decision. Under centralization, if lobbies form, lobby competition may completely offset their influence on policy; however it is possible that the threat of lobbying may affect policy even when no lobby forms in equilibrium. Finally, when lobbying affects policy (even if no lobby forms in equilibrium), the political equilibrium is always more moderate than the one where lobbying is not taken into account.

Keywords: lobby formation, common agency, pressure groups, centralization

JEL Classification: H23, H77, D72

Suggested Citation

Redoano, Michela, Does Centralization Affect the Number and Size of Lobbies? (April 2007). CESifo Working Paper Series No. 1968, Available at SSRN: https://ssrn.com/abstract=982797 or http://dx.doi.org/10.2139/ssrn.982797

Michela Redoano (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 24 7652 3474 (Phone)
+44 24 7652 3032 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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