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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. PSPE working papers, 03-2007. Department of Government, London School of Economics and Political Science, London, UK.

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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 (Working Paper)
Official URL: http://www2.lse.ac.uk/government/PSPE/WorkingPaper...
Additional Information: © 2007 The Authors
Library of Congress subject classification: J Political Science > JC Political theory
Sets: Departments > Government
Research centres and groups > Political Science and Political Economy Group
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 03-2007
Date Deposited: 11 Sep 2009 13:55
URL: http://eprints.lse.ac.uk/25171/

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