Inefficient Lobbying, Populism and Oligarchy

Posted: 11 Sep 2008

See all articles by Francisco H. G. Ferreira

Francisco H. G. Ferreira

World Bank - Development Research Group (DECRG)

Filipe R. Campante

Harvard University - Harvard Kennedy School (HKS)

Multiple version iconThere are 2 versions of this paper

Date Written: 2007

Abstract

This paper analyzes the efficiency consequences of lobbying in a production economy with imperfect commitment. We first show that the Pareto efficiency result found for truthful equilibria of common agency games in static exchange economies no longer holds under these more general conditions. We construct a model of pressure groups where the set of efficient truthful common-agency equilibria has measure zero. Second, we show that under fairly general assumptions, the equilibrium will be biased against the group with the highest productivity of private capital, reflecting the fact that, on the margin, less productive groups find lobbying relatively more rewarding. Finally, as an application, if lobbies representing the "poor" and the "rich" have identical organizational capacities, we show that the equilibrium is biased towards the poor, who have a comparative advantage in politics, rather than in production. If the pressure groups differ in their organizational capacity, both pro-rich (oligarchic) and pro-poor (populist) equilibria may arise, all of which are inefficient with respect to the constrained optimum.

Keywords: Lobbying, Populism, Oligarchy, Wealth distribution and economic efficiency, Inequality

Suggested Citation

Ferreira, Francisco H. G. and Campante, Filipe R., Inefficient Lobbying, Populism and Oligarchy (2007). Journal of Public Economics, Vol. 91, No. 5-6, 2007. Available at SSRN: https://ssrn.com/abstract=997182

Francisco H. G. Ferreira

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-4382 (Phone)

Filipe R. Campante (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-384-7958 (Phone)

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