My main academic interests relate to topics in public economics, industrial organization, political economics, and applied microeconomics. Current research projects focus on the implications ofWorking Papers
Abstract Using a model of repeated agency nested in a simple general equilibrium framework, we explain the structure of the lobbying industry. Lobbying is divided between direct representation by special interests to policymakers, and indirect representation where special interests employ professional intermediaries called commercial lobbyists to lobby policymakers on their behalf. Our analytical structure allows us to explain several trends in lobbying. For example, using the observation that in the U.S. over the last 20 years policymakers have spent an increasing amount of their time fundraising as opposed to legislating, we are able to explain why the share of commercial lobbyist activity in total lobbying has risen dramatically and now constitutes over 60% of the total. The key scarce resource in our analysis is policymakers' time. They allocate this resource via implicit repeated agency contracts which are used to incent special interests and commercial lobbyists to provide a mix of financial contributions and information on policy proposals. These implicit agency contracts solve both an information problem in the presence of unverifiable policy information and a contracting problem in the absence of legal enforcement. These repeated relationship, that are often described using the pejorative term cronyism in the popular press, may in certain circumstances be welfare improving. We analyze when this will be the case.
Abstract We study lobbying in a setting in which decision-makers share resources in a political network. Two opposing lobby groups choose which decision-maker they want to target with their resource provision, and their decision depends on the ideological bias of the decision-makers as well as the network structure. We characterize the optimal lobbying strategies in various network settings and show that a higher resource flow as well as homophily (the phenomenon that like-minded individuals are directly connected to each other) reinforce decision-makers' ideological bias. Our analysis highlights that competing lobbyists' efforts do not neutralize each other and their lobbying payoffs and competitive advantages depend on the decision-making networks they face. We then show that our findings are consistent with empirically observed lobbying patterns.
Current version: June 2015.
Supplemental: Supplemental Appendix
Abstract We develop a model of lobbying that combines costly information gathering with legislative subsidies. In contrast to other models of informational lobbying we focus on the implications of a policymaker's and a lobby's resource constraints for lobbying activities and the political process. Both a policymaker and a lobby can gather information, and each can either fund or subsidize a policy reform. We show that a lobby is more likely to persuade a policymaker to change her anticipated behavior of gathering information or choosing a policy, if the precision of the information signals received by the lobby is more asymmetric rather than better or if information costs are lower. We also show that a lobby is more likely to persuade critical to optimistic policymakers and more likely to support those financially. By varying resource endowments, we address whether costly persuasion and financial contributions as legislative subsidies are substitutes or complements in the lobbying process and derive the conditions for each.
Current version: Soon to be updated.
Supplemental .nb file: upon request.
Abstract This paper analyzes the effective regulation of commercial lobbying activities and focuses on the endogenous choice of regulatory institutions. The analysis uses a model of commercial lobbying in which citizens hire lobbyists to present policy matters on their behalf, and policymakers announce political access rules to induce citizens and lobbyists to engage in information acquisition and make financial contributions. The distribution of private costs and public informational benefits from commercial lobbying can explain why commercial lobbying is widely employed, but may not be socially efficient, and may lack public support. I derive the institutional conditions under which a market outcome can be first-best as well as the conditions under which a first-best institution will or will not be self-stable. One result is that current lobbying regulation may fail to be effective: unable to limit lobbyists' and policymakers' incentives to substitute financial contributions for socially beneficial information acquisition. The analysis highlights the necessity to monitor information transfers as well as financial transfers to construct effective regulatory instruments. Additional results explain why endogenous reforms that regulate lobbying activities may or may not occur.
Abstract In this paper we present a model of the behavior of commercial lobbying firms (such as the so-called K-Street lobbyists of Washington, D.C.). In contrast to classical special interest groups, commercial lobbying firms represent a variety of clients and are not directly affected by policy outcomes. They are hired by citizens, or groups of citizens, to act as intermediaries on their behalf with policymakers. In our analysis we address two basic questions; what tasks are commercial lobbying firms performing, and what are the implications of their existence for social welfare? We answer the first part of this question by proposing that commercial lobbying firms possess a verification technology that allows them to improve the quality of information concerning the social desirability of policy proposals. This gives policymakers the incentive to allocate their scarce time to commercial lobbying firms. Essentially, it is this access to policymakers that commercial lobbying firms sell to their clients. To address the question of social welfare we construct a simple general equilibrium model that includes commercial lobbying firms, and compare the equilibrium obtained under market provision of lobbying services to the first-best optimum. We find that the market level of lobbying services can be socially either too large or too small, and characterize when each will be the case.
Abstract An income growth pattern is pro-poor if it reduces a (chosen) measure of poverty by more than if all incomes were growing equiproportionately. Inequality reduction is not sufficient for pro-poorness. In this paper, we explore the nexus between pro-poorness, growth and inequality in some detail using simulations involving the displaced lognormal, Singh-Maddala and Dagum distributions. For empirically relevant parameter estimates, distributional change preserving the functional form of each of these 3-parameter distributions is often either pro-poor and inequality reducing, or pro-rich and inequality exacerbating, but it is also possible for pro-rich growth to be inequality reducing. There is some capacity for each of these distributions to show trickle effects (weak pro-richness) along with inequality-reducing growth, but virtually no possibility of pro-poorness for growth which increases overall inequality. Implications are considered.
Previous (longer) working paper: ECINEQ #2011-214.
Works in Progress