Interest Group Politics in a Federation

55 Pages Posted: 2 May 2007 Last revised: 24 Nov 2014

See all articles by Sergei M. Guriev

Sergei M. Guriev

Sciences Po; Centre for Economic Policy Research (CEPR); European Bank for Reconstruction and Development (EBRD)

Evgeny Yakovlev

New Economic School

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

Multiple version iconThere are 2 versions of this paper

Date Written: January 17, 2008

Abstract

The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by the spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state externalities to a larger extent than the lobbyists with interests within a single state. We use variation in the geographic boundaries of politically-powerful industrial interests to estimate the effect of inter-state externalities on firm performance. Using firm-level panel data from a peripheralized federation, Russia in 1996-2003, we show that, controlling for firm fixed effects, the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi-regional business groups compared to the number influenced by local business groups. Our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter-state externalities.

Keywords: interest groups, lobbying, inter-regional trade barriers, tariffs, multinationals, federalism

JEL Classification: P26, D78, F15, F23, H77

Suggested Citation

Guriev, Sergei M. and Yakovlev, Evgeny and Zhuravskaya, Ekaterina V., Interest Group Politics in a Federation (January 17, 2008). Journal of Public Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=983883 or http://dx.doi.org/10.2139/ssrn.983883

Sergei M. Guriev

Sciences Po ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

HOME PAGE: http://econ.sciences-po.fr/staff/sergei-guriev

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Evgeny Yakovlev

New Economic School ( email )

Nakhimovsky pr., 47, office 905
Moscow, 117418
Russia

Ekaterina V. Zhuravskaya (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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