Interest Group Politics in a Federation

Sergei Guriev, Evgeny Yakovlev and Ekaterina Zhuravskaya

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Abstract: The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by the spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state externalities to a larger extent than the lobbyists with interests within a single state. We use variation in the geographic boundaries of politically-powerful industrial interests to estimate the effect of inter-state externalities on firm performance. Using firm-level panel data from a peripheralized federation, Russia in 1996-2003, we show that, controlling for firm fixed effects, the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi-regional business groups compared to the number influenced by local business groups. Our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter-state externalities.

Keywords: Federalism; Interest groups; Inter-jurisdictional externalities; Inter-state trade barriers; Multinational firms (search for similar items in EconPapers)
Date: 2010-10
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Citations: View citations in EconPapers (15)

Published in Journal of Public Economics, 2010, 94 (9-10), pp.730-748. ⟨10.1016/j.jpubeco.2010.04.004⟩

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Related works:
Journal Article: Interest group politics in a federation (2010)
Working Paper: Interest Group Politics in a Federation (2010)
Working Paper: Interest Group Politics in a Federation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00754421

DOI: 10.1016/j.jpubeco.2010.04.004

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