The politics of growth: can lobbying raise growth and welfare?

Paulo Julio

Nova SBE Working Paper Series from Universidade Nova de Lisboa, Nova School of Business and Economics

Abstract: This paper aims at analyzing the e ects of lobbying over economic growth and primarily welfare. We model explicitly the interaction be- tween policy-makers and rms in a setup where the latter undertakes political contributions to the former in exchange for more restrictive market regulations which induce exit and enhance the pro tability of the market. In a sectorial equilibrium, despite stimulating growth, lobbying restricts the market structure and reduces welfare when com- pared to the free-entry outcome. However, once general equilibrium considerations are taken into account, we nd that lobbying may im- prove welfare over a welfare maximizing free-entry equilibrium, by means of an expansion in aggregate demand. This introduces a new paradigm in the literature about the e ects of lobbying over economic performance.

Keywords: Lobbying; market structure; R&D investment; growth; welfare (search for similar items in EconPapers)
JEL-codes: D72 L13 O31 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2009
New Economics Papers: this item is included in nep-mic and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:unl:unlfep:wp542

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