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Entry and asymmetric lobbying: why governments pick losers

Baldwin, Richard E. and Robert-Nicoud, Frédéric (2007) Entry and asymmetric lobbying: why governments pick losers. CEPDP, 791. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 9780853281672

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Abstract

Governments frequently intervene to support domestic industries, but a surprising amount of this support goes to ailing sectors. We explain this with a lobbying model that allows for entry and sunk costs. Specifically, policy is influenced by pressure groups that incur lobbying expenses to create rents. In expanding industries, entry tends to erode such rents, but in declining industries, sunk costs rule out entry as long as the rents are not too high. This asymmetric appropriability of rents means losers lobby harder. Thus it is not that government policy picks losers, it is that losers pick government policy.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 2007 the authors
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
J Political Science > JA Political science (General)
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: P - Economic Systems > P1 - Capitalist Systems > P16 - Political Economy
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H32 - Firm
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Geography and Environment
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 791
Date Deposited: 21 Jul 2008 11:06
URL: http://eprints.lse.ac.uk/19726/

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