IDEAS home Printed from https://ideas.repec.org/a/eee/jmacro/v42y2014icp263-280.html
   My bibliography  Save this article

The politics of growth: Can lobbying raise growth and welfare?

Author

Listed:
  • Júlio, Paulo

Abstract

We consider a setup where lobbyist firms undertake contributions to an office-motivated policy maker in exchange for profit increasing regulations, in a general equilibrium model of R&D-driven growth. We find that, despite increasing concentration—which leads to higher prices and less varieties—lobbying may stimulate growth and increase welfare by means of an expansion in aggregate demand if its real costs are small. This conclusion is supported by a simple calibration exercise.

Suggested Citation

  • Júlio, Paulo, 2014. "The politics of growth: Can lobbying raise growth and welfare?," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 263-280.
    • Handle: RePEc:eee:jmacro:v:42:y:2014:i:c:p:263-280
    DOI: 10.1016/j.jmacro.2014.08.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0164070414001062
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jmacro.2014.08.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. anonymous, 1995. "Does the bouncing ball lead to economic growth?," Regional Update, Federal Reserve Bank of Atlanta, issue Jul, pages 1-2,4-6.
    2. Funke, Michael & Strulik, Holger, 2000. "On endogenous growth with physical capital, human capital and product variety," European Economic Review, Elsevier, vol. 44(3), pages 491-515, March.
    3. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
    4. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    5. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 1-37.
    6. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    7. Peretto, Pietro F., 1999. "Industrial development, technological change, and long-run growth," Journal of Development Economics, Elsevier, vol. 59(2), pages 389-417, August.
    8. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    9. Giorgio Bellettini & Gianmarco I. P. Ottaviano, 2005. "Special Interests and Technological Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 43-56.
    10. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    11. Jones, Charles I & Williams, John C, 2000. "Too Much of a Good Thing? The Economics of Investment in R&D," Journal of Economic Growth, Springer, vol. 5(1), pages 65-85, March.
    12. Per Krusell & José-Víctor Ríos-Rull, 1996. "Vested Interests in a Positive Theory of Stagnation and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 301-329.
    13. Peretto, Pietro F, 1998. "Technological Change, Market Rivalry, and the Evolution of the Capitalist Engine of Growth," Journal of Economic Growth, Springer, vol. 3(1), pages 53-80, March.
    14. Peretto, Pietro F., 1999. "Firm size, rivalry and the extent of the market in endogenous technological change," European Economic Review, Elsevier, vol. 43(9), pages 1747-1773, October.
    15. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 503-530.
    16. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-1023, October.
    17. Henri L. F. de Groot & Richard Nahuis, 2002. "Optimal Product Variety and Economic Growth: The Trade-off between Internal and External Economies of Scale," Journal of Economics, Springer, vol. 76(1), pages 1-32, May.
    18. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    19. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    20. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 24(1), pages 11-32.
    21. Philippe Aghion & Alberto Alesina & Francesco Trebbi, 2007. "Democracy, Technology, and Growth," NBER Working Papers 13180, National Bureau of Economic Research, Inc.
    22. Baron, David P., 1994. "Electoral Competition with Informed and Uninformed Voters," American Political Science Review, Cambridge University Press, vol. 88(1), pages 33-47, March.
    23. Holger Strulik, 2007. "Too Much of a Good Thing? The Quantitative Economics of R&D‐driven Growth Revisited," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 369-386, June.
    24. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 265-286.
    25. Vencatachellum, Desire, 1998. "Endogenous growth with strategic interactions," Journal of Economic Dynamics and Control, Elsevier, vol. 23(2), pages 233-254, September.
    26. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
    27. Theo Van De Klundert & Sjak Smulders, 1997. "Growth, Competition and Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 99-118, March.
    28. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    29. Diego Comin, 2004. "R&D: A Small Contribution to Productivity Growth," Journal of Economic Growth, Springer, vol. 9(4), pages 391-421, December.
    30. Susanto Basu, 1996. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 719-751.
    31. Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
    32. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    33. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    34. David Austen-Smith, 1987. "Interest groups, campaign contributions, and probabilistic voting," Public Choice, Springer, vol. 54(2), pages 123-139, January.
    35. Peretto, Pietro F, 1996. "Sunk Costs, Market Structure, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 895-923, November.
    36. Grossmann, Volker & Steger, Thomas M., 2008. "Anti-competitive conduct, in-house R&D, and growth," European Economic Review, Elsevier, vol. 52(6), pages 987-1008, August.
    37. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-330, April.
    38. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
    39. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
    40. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-121, January.
    41. Daniel Brou & Michele Ruta, 2013. "Rent-Seeking, Market Structure, and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(3), pages 878-901, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yu‐Bong Lai, 2020. "Rent‐seeking, R&D, and productivity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(4), pages 404-419, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniel Brou & Michele Ruta, 2013. "Rent-Seeking, Market Structure, and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(3), pages 878-901, July.
    2. A. Nifo & G. Vecchione, 2015. "Measuring Institutional Quality in Italy," Rivista economica del Mezzogiorno, Società editrice il Mulino, issue 1-2, pages 157-182.
    3. Reis, Ana Balcão & Traca, Daniel A., 2008. "Spillovers and the competitive pressure for long-run innovation," European Economic Review, Elsevier, vol. 52(4), pages 589-610, May.
    4. Agostino, Mariarosaria & Nifo, Annamaria & Trivieri, Francesco & Vecchione, Gaetano, 2016. "Total factor productivity heterogeneity: channelling the impact of institutions," MPRA Paper 72759, University Library of Munich, Germany.
    5. Pedro Rui Mazeda Gil & Paulo Brito & Óscar Afonso, 2008. "A Model of Quality Ladders with Horizontal Entry," FEP Working Papers 296, Universidade do Porto, Faculdade de Economia do Porto.
    6. Yi-Ling Cheng & Juin-Jen Chang, 2017. "The Quality of Intermediate Goods: Growth and Welfare Implications," The Economic Record, The Economic Society of Australia, vol. 93(302), pages 434-447, September.
    7. Étienne Chantrel & Andre Grimaud & Frederic Tournemaine, 2012. "Pricing Knowledge and Funding Research of New Technology Sectors in a Growth Model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(3), pages 493-520, June.
    8. Bucci, Alberto & Parello, Carmelo Pierpaolo, 2009. "Horizontal innovation-based growth and product market competition," Economic Modelling, Elsevier, vol. 26(1), pages 213-221, January.
    9. Barelli, Paulo & Pessôa, Samuel de Abreu, 2002. "A model of capital accumulation and rent-seeking," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 449, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    10. Gómez, Manuel A. & Sequeira, Tiago N., 2013. "Optimal R&D subsidies in a model with physical capital, human capital and varieties," Economic Modelling, Elsevier, vol. 30(C), pages 217-224.
    11. Grimaud, Andre & Tournemaine, Frederic, 2007. "Why can an environmental policy tax promote growth through the channel of education?," Ecological Economics, Elsevier, vol. 62(1), pages 27-36, April.
    12. Yu‐Bong Lai, 2020. "Rent‐seeking, R&D, and productivity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(4), pages 404-419, September.
    13. Alberto Bucci, 2008. "Competition and R&D investment in human capital-driven growth," Politica economica, Società editrice il Mulino, issue 2, pages 235-265.
    14. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2014. "What Do We Learn From Schumpeterian Growth Theory?," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 515-563, Elsevier.
    15. Toshihiko Mukoyama & Latchezar Popov, 2014. "The Political Economy of Entry Barriers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 383-416, July.
    16. Jerbashian Vahagn, 2016. "Knowledge licensing in a model of R&D-driven endogenous growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 555-579, June.
    17. Magnus Henrekson & Jesper Roine, 2007. "Promoting Entrepreneurship in the Welfare State," Chapters, in: David B. Audretsch & Isabel Grilo & A. Roy Thurik (ed.), Handbook of Research on Entrepreneurship Policy, chapter 5, Edward Elgar Publishing.
    18. Auriol, Emmanuelle & Straub, Stéphane & Flochel, Thomas, 2016. "Public Procurement and Rent-Seeking: The Case of Paraguay," World Development, Elsevier, vol. 77(C), pages 395-407.
    19. Perez-Sebastian, Fidel, 2000. "Transitional dynamics in an R&D-based growth model with imitation: Comparing its predictions to the data," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 437-461, April.
    20. Aghion, Philippe & Akcigit, Ufuk & Cagé, Julia & Kerr, William R., 2016. "Taxation, corruption, and growth," European Economic Review, Elsevier, vol. 86(C), pages 24-51.

    More about this item

    Keywords

    Lobbying; Market structure; R&D investment; Growth; Welfare;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:42:y:2014:i:c:p:263-280. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622617 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.