Entry and asymmetric lobbying: why governments pick losers

Richard Baldwin and Frederic Robert-Nicoud

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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)
Pages: 30 pages
Date: 2007-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (94)

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http://eprints.lse.ac.uk/19726/ Open access version. (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:ehl:lserod:19726

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