New Thinking in Political Economy series
Edited by Francisco Cabrillo and Miguel A. Puchades-Navarro
Chapter 14: Regulator preferences and lobbying efforts in rent-seeking contests
Standard public choice analysis of the political allocation of resources among competing interest groups has generated a growing literature on rent-seeking. In a typical rent-seeking contest artificially created rents are allocated in the political market, and players compete for these, investing resources in a contest that resembles a lottery. In an imperfectly discriminating contest – as considered in this chapter – players devote efforts to increase the likelihood of obtaining rent. This leads to an inefficient allocation of resources, with the inefficiency measured as the overall amount of rent-seeking invested in by players. However, this insight ignores the mechanism by which rents are awarded. By assuming that only relative efforts alter the allocation of the rent, this rules out regulator preferences. These can, however, play a significant role. Some authors have incorporated ideology or political preferences into the analysis of lobbying, such as Martimort and Semenov (2007a, 2007b, 2008) from a theoretical standpoint, or McKay (2010) from an empirical one.
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