Privatization, free riding, and industry-expanding lobbying

Alexander Volokh

International Review of Law and Economics, 2010, vol. 30, issue 1, 62-70

Abstract: Critics of privatization argue that privatization encourages providers to lobby for industry expansion. I argue that this is not generally true when public-sector actors also lobby. Where the effectiveness of advocacy depends on total expenditures, some initial amount of privatization always decreases industry-expanding advocacy. The extent of privatization for which this no longer holds depends on the total benefits of provision to the public and private-sector actors, as well as the extent of collusion. Under relaxed assumptions, the effect of privatization on industry-expanding advocacy is ambiguous. The charge that privatization will increase advocacy is unfounded without further empirical development.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:30:y:2010:i:1:p:62-70

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