Policy Reform and the Free-Rider Problem
نویسندگان
چکیده
We investigate policy reform in a model in which there are both rent seeking and lobbying activities. These two activities involve similar skills, so a reform which reduces rents will cause a shift into lobbying. Also, lobbying is subject to a free-rider problem, so the marginal return to the industry from lobbying may greatly exceed an individual firm’s return to lobbying. Thus, the shift into lobbying which results from a reduction in available rents may lead to a large increase in transfers to the lobbying industry. Under some circumstances, it is possible for a reform which reduces available rents to increase the total of rents plus transfers to the industry.
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