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Interest Groups, Economic Competition, and Endogenous Public Policy

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  • Yu-Bong Lai

Abstract

A common-agency model is constructed to investigate how two interest groups a workers' group and an environmentalists' group affect the formation of a capital tax and an environmental policy. The political power of interest groups, which is related to the free-rider problem that they face, is crucial in deciding these policies. This paper depicts the conditions under which either NIMBY or a race to the bottom occurs. Moreover, this paper examines whether the equivalence between a pollution tax and a pollution standard is sustained despite interference from interest groups.

Suggested Citation

  • Yu-Bong Lai, 2003. "Interest Groups, Economic Competition, and Endogenous Public Policy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(2), pages 342-361, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200306)159:2_342:igecae_2.0.tx_2-5
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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