Lobbying, Corruption, and Regulatory Constraints: An Analysis of Eastern European Business Associations

Kiselev, Eugene (2013): Lobbying, Corruption, and Regulatory Constraints: An Analysis of Eastern European Business Associations.

Abstract

This paper examines lobbying and corruption as alternative ways of dealing with regulatory obstacles. I propose a model where firms facing a costly regulation can bribe a rule-enforcing bureaucrat to get around it, lobby the government to reduce its impact, or do both. I then use a firm-level dataset of Eastern European enterprises to examine whether firms use membership in a lobby group as a substitute for the bribe payments they make to rule-enforcing bureaucrats. The results indicate that firms who join lobby groups do not stop paying bribes to bureaucrats, and firms more impacted by corruption are no more likely to join a lobby group than their counterparts. On the other hand joining a lobby group increases the likelihood of a firm bribing legislators and other rule makers, suggesting that lobbying introduces the possibility of state capture by allowing firms access to policy makers that they wouldn't otherwise have.

• Item Type: MPRA Paper
• Language: English
• Keywords: Lobbying, Corruption, Regulations
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation

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