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It Takes Two to Tango: Lobbies and the Political Business Cycle

Daniel Horgos and Klaus Zimmermann

No 98/2009, Working Paper from Helmut Schmidt University, Hamburg

Abstract: With interest groups significantly affecting economic performance (according to Mancur Olson) and a vital interest of governments in economic growth and low unemployment in order to win elections, there should be a link between political business cycles and the evolution of lobbies over time which has totally been ignored in the literature up to now. In modeling this link in a theoretical and empirical way we try to answer two questions: Is it possible to interpret Olson´s Law of Interest Groups not only as a long run phenomenon but also in a short-run perspective, integrating it into the theory of political business cycles? And: is there any empirical evidence that a typical pattern of lobby behavior and macroeconomic status exists which is consistent over a couple of election periods? In order to investigate these issues, we first analyze some literature that is usually ignored in the more technical contributions evaluating Olson´s law, but proves to be highly important as background for answering the above mentioned questions. We then illustrate how a model consisting of Olson´s interest-groups theory and the endeavors of governments to win the majority of votes in elections could look like, before we perform a time-series-analysis based on the lobby-list of the German Bundestag in order to gain some more insights into the relationships between lobbies, governments and voters. As a result we discover a consistent behavior of the lobbies over the cycle that boils down to some kind of non-aggression pact between the lobbies and the governments irrespective of their political alignments.

Keywords: interest groups; political business cycles; growth; unemployment; inflation (search for similar items in EconPapers)
JEL-codes: D72 D78 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2009-09-07
New Economics Papers: this item is included in nep-cdm, nep-mac and nep-pol
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