Lobbying and Growth: Explaining Differences among OECD Countries

Mehmet, Babacan (2009): Lobbying and Growth: Explaining Differences among OECD Countries. Published in: Topics in Middle Eastern and North African Economies , Vol. 12, No. 1 (September 2010): pp. 1-20.

Abstract

The paper is an attempt to observe the effects of the development of rent-seeking or lobbying groups on the growth pace of a number of countries. The relationship between the policy suggestions of competing interest groups, and economic policies implemented both at micro and macro level after the 1980s revealed the importance of lobbying effect on policies fostering or inhibiting most of the developing countries’ long-run growth levels. In addition to the vast literature on the positive theory of regulation and the theories of competition among the pressure groups, the current study is to provide some examples of the literature on lobbying and its effects on growth. Taking from Mancur Olson’s inspiring book, The Rise and Decline of Nations, this paper reviews the following literature and discussions with special emphasis on Gary Becker and Kevin M. Murphy’s works while adding an empirical component whether it is a panel or cross-country data analysis. Availability of the relevant data is a major concern due to the inconsistencies in measuring the size and effect of lobbying for each country. A set of countries including only the OECD members will constitute the subject of the empirical investigation. The dataset on the special interest groups is provided from K.G. Saur’s World Guide to Trade Associations as do the previous studies. For the purpose of the further research, some derivations and proposals would be provided to solve the puzzle. The study has the intuition that the development of lobbying powers is closely related to other political factors effective on growth rates such as democracy, civil society. Overall, the paper is to investigate the role of lobbying on growth rates on a multi-country level while implying the effects to change relatively in accordance with country specific effects. Thus the conclusion will state that depending on the country specific patterns, each OECD member exhibits slightly different effects of the relative size –by proxies- and number of business interest groups on growth due to the country specific effects. This work specifically focuses on Turkey which is shown to have negligible effect on the overall club members in terms of special interest groups on growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic Policy, Growth, Development, Lobbying, Interest-group, Rent-seeking, Government Regulation
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O25 - Industrial Policy; F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O39 - Other; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies

References

1. Becker, Gary S., A Theory of Competition Among Pressure Groups for Political Influence, The Quarterly Journal of Economics, Vol. 98, No. 3 (Aug., 1983), pp. 371- 400.

2. Becker, Gary S., Public Policies, Pressure Groups, and Dead Weight Cost, Center for the Study of the Economy and the State Working Paper No. 35, June 1984, pp. 1- 35. 3. Buchanan, James M., An Economic Theory of Clubs, Economica, New Series, Vol. 32, No. 125 (Feb., 1965), pp. 1- 14.

4. Coates et al., Determinants of Interest Group Formation, Public Choice, 2007a (133), pp. 377- 391.

5. Coates et al., Special-Interest Groups and Growth, SSRN Working Paper, (July, 2007b), pp. 1- 32.

6. Coates et al., Special-Interest Groups and Volatility, Economics Bulletin, Vol. 15, No. 18 (Aug. 2007c), pp. 1- 13.

7. Heckelman, Jac C., Consistent Estimates of the Impact of Special Interest Groups on Economic Growth, Public Choice, Vol. 104, 2000, pp. 319- 327.

8. Krueger, Anne O., The Political Economy of the Rent-Seeking Society, The American Economic Review, Vol. 64, No. 3 (Jun. 1974), pp. 291- 303.

9. Maitland, Ian, Interest Groups and Economic Growth Rates, The Journal of Politics, Vol. 47, No. 1 (Feb. 1985), pp. 44- 58.

10. Mork, Knut Anton, Living with Lobbying: A Growth Policy Co-Opted by Lobbyists Can Be Better than No Growth Policy at All, The Scandinavian Journal of Economics, Vol. 95, No. 4 (Dec. 1993), pp. 597- 605.

11. Murphy, Kevin M., Shleifer, Andrei, and Vishny, Robert, The Allocation of Talent: Implications for Growth, Quarterly Journal of Economics, May 1991 (106), pp. 503- 530.

12. Murphy et al., Why Is Rent-Seeking So Costly to Growth?, The American Economic Review Papers and Proceedings, May 1993.

13. North, Douglass C., A Theory of Economic Change (Review), Science, New Series, Vol. 219, No. 4581 (Jan. 1983), pp. 163- 164.

14. Peltzman, Sam, Toward a More General Theory of Regulation, Journal of Law and Economics, August 1976.

15. Olson, Mancur, The Logic of Collective Action, Harvard University Press, Cambridge, 1965.

16. Olson, Mancur, The Rise and Decline of Nations, Yale University Press, 1982.

17. Stigler, George J., The Theory of Economic Regulation, The Bell Journal of Economics and Management Science, Spring 1971.

18. Tollison, Robert D., The Rise and Decline of Nations by Mancur Olson (Review), Southern Economic Journal, Vol. 49, No. 4 (Apr. 1983), pp. 1214- 1215.

19. Tullock, Gordon, The Rise and Decline of Nations by Mancur Olson (Review), Public Choice, Vol. 40, No. 1 (1983), pp. 111- 116.

20. Turkish Industrialists’ and Businessmen’s Association (TUSIAD) and Organization for Economic Co-Operation and Development (OECD), Understanding Economic Growth, April 2005(a).

21. Unger, Brigitte and van Waarden, Frans van, Interest Associations and Economic Growth: A Critique of Mancur Olson’s ‘Rise and Decline of Nations’, Review of International Political Economy, Vol. 6, No. 4 (1999), pp. 425- 467.

22. Zils, M. and Verrel, B. (eds.), World Guide to Trade Associations (1973, 1985, 1995, 1999, 2002), K. G. Saur, München.