Entry and Asymmetric Lobbying: Why Governments Pick Losers

Richard Baldwin and Frederic Robert-Nicoud

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Governments frequently intervene to support domestic industries, but a surprising amount of this support goes to ailing sectors. We explain this with a lobbying model that allows for entry and sunk costs. Specifically, policy is influenced by pressure groups that incur lobbying expenses to create rents. In expanding industries, entry tends to erode such rents, but in declining industries, sunk costs rule out entry as long as the rents are not too high. This asymmetric appropriability of rents means losers lobby harder. Thus it is not that government policy picks losers, it is that losers pick government policy.

Keywords: Lobbying; Sunset Industries; Sunk Costs (search for similar items in EconPapers)
JEL-codes: H32 P16 (search for similar items in EconPapers)
Date: 2007-05
New Economics Papers: this item is included in nep-cdm and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (107)

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https://cep.lse.ac.uk/pubs/download/dp0791.pdf (application/pdf)

Related works:
Journal Article: Entry and Asymmetric Lobbying: Why Governments Pick Losers (2007)
Working Paper: Entry and asymmetric lobbying: why governments pick losers (2007)
Working Paper: Entry and Asymmetric Lobbying: Why Governments Pick Losers (2006)
Working Paper: Entry and Asymmetric Lobbying: Why Governments Pick Losers (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0791

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