Browse by title

You are looking at 1 - 10 of 14 items :

  • Economics and Finance x
  • Regulation and Governance x
  • Public Choice x
  • Chapters/Articles x
Clear All Modify Search
This content is available to you

Urs S. Brandt and Gert T. Svendsen

You do not have access to this content

Urs S. Brandt and Gert T. Svendsen

Chapter 7 gave two examples on how strategic signalling and the alignment of incentives may be used in lobbying efforts. First, it extended the political economy idea developed by Ackerman and Hassler (1981) which suggested that a coalition of environmentalists and industrialists successfully lobbied the United States Congress. Stricter technology-based standards for new emitting sources than for existing sources was the resulting policy outcome serving the common interest of the coalition, because it offered both a barrier to entry for new firms and improved environmental quality. We focused on the case of international climate negotiations and the promotion of wind-based energy and suggested that one reason for the European Union’s (EU) eagerness to push forward ambitious reduction target levels (and thereby promote new green industries) could be a similar coalition between industrialists and environmentalists. Such a strategy can be seen in the context of the ‘Bootleggers and Baptists’ theory, where the Baptists (in our case the environmentalists) demand changes in behaviour on moral grounds. In contrast, the Bootleggers (the producers of renewable energy), who profit from the regulation, keep a low profile. The heavy subsidization of renewable energy sources, such as wind energy, could be viewed as a successful policy outcome for the coalition of industrialists and environmentalists, offering both market protection and improved environmental quality. Second, in the fishing industry, fishermen traditionally have incentives to lobby and signal too many fish in the sea in order to have access to a high short-term catch level and subsidies, whereas marine biologists have incentives to lobby and signal too few fish in the sea. Marine biologists have an incentive to maximize their budgets both for altruistic reasons (to restore fish stocks) and for private reasons (by increasing demand for their services). We analysed the outcome of a game where the biologists and the fishermen are informed about the true stock size, while the decision-maker is not. The model showed that interest groups traditionally perceived as opponents may have mutual interests. Solving the current deadlock in the EU fishery negotiations highlights the need to reveal the true incentives that motivate stakeholders, such as the symbiosis and alignment of interests identified here.
You do not have access to this content

Urs S. Brandt and Gert T. Svendsen

Chapter 3 developed two models on how bureaucratic institutions can affect economic growth. The first model is derived from resource economics and deals with budget maximization, whereas the second model is a principal_agent model on corruption. In the first model of bureaucratic budget catching, bureaucracies are competing for resources like fishermen. Considering taxpayers’ money a free access resource in the absence of tight fiscal control (passive sponsors), bureaucratic self-interest may induce excessive spending even from the perspective of the bureaucrats themselves. Here, bureaucrats would spend resources on lobbying for their own interests rather than providing public goods, thus rendering the bureaus more inefficient. Such decreases in public goods provision affect production society negatively in the next period, leaving fewer resources for the total group of bureaucrats. One possible empirical implication could be strong bureaucratic lobbying within the EU for more administrative resources due to the institutional stronghold of the Commission compared to the Parliament. The second model highlighted why bureaucratic corruption occurs in the European Union (EU) system. Several examples suggest that bureaucratic corruption exists and that the Commission’s anti-fraud agency, Office de Lutte Anti-Fraude (OLAF), is not a fully independent authority. We thus developed a novel interpretation of the principal_supervisor_agent model to cope with non-independent anti-fraud units. This model shows that corruption is likely to occur when the expected value to the client from bribing the agent is larger than the expected value to the principal of truth-telling by the supervisor. Overall, this analysis points to the risks of flawed incentives and the lack of institutional independence among principal, agent, supervisor and clients. Our main policy recommendations are that an anti-fraud unit like OLAF should be placed outside the Commission, and that whistleblowers should receive adequate protection.
This content is available to you

Urs S. Brandt and Gert T. Svendsen

This content is available to you

Urs S. Brandt and Gert T. Svendsen

You do not have access to this content

Urs S. Brandt and Gert T. Svendsen

Chapter 6 questioned how countervailing lobbying and the potential waste of resources could be applied to the case of brown and green power plants. Sometimes interest groups may fight each other, competing for economic rents. Such competition, however, may lead to socially wasteful outcomes. So how can countervailing lobbying and the potential waste of resources be applied? We argued that two countervailing lobbying groups, such as those of green and brown power plants within the European Union Emissions Trading System (EU ETS), will bid against each other in their quest for special political favours. Countervailing lobbying was dealt with in a non-cooperative game setting with a Prisoner’s Dilemma. Both symmetric and non-symmetric cases were analysed, and lobbying effort was assessed with respect to its distortive effect, its waste of resources and the ‘slack’ generated in policy changes. The model suggests that lobbying costs should be raised in order to reduce lobbying effort and thereby minimize the waste of resources. Making lobbying more costly is the most effective way to reduce the influence of lobbying incentives on policy, thus reducing the welfare loss associated with lobbying.
You do not have access to this content

Urs S. Brandt and Gert T. Svendsen

Chapter 4 focused on how lobbying took place in the main case of the European Union Emissions Trading System (EU ETS) and the risk of cheating in this system. First, concerning the EU ETS, the original proposal from the Commission was changed during the decision-making process, especially regarding the final choice of allocation rule. This change may be explained by the role of industrial groups in the policy-making process. By using rational choice theory and by analysing the Green Paper hearing replies from the main industrial groups, we argued that producers were active and influential in order to reap a net gain from being regulated by a grandfathered emissions trading system. This was so because total costs of emissions reduction and lobbying were likely to be smaller than the total economic rents from achieving this type of regulation. Second, we investigated the risk of favouring domestic industries in the current EU ETS. As the EU forms a weak federal structure compared to the US, there is a risk that individual countries may be tempted to free-ride on the others by choosing to turn a blind eye to industry-level corruption when this favours their own industries. In other words, the optimal level of national cheating may not take into account the external cost it imposes upon other countries, and the risk of large-scale cheating and the possibility of an EU ETS collapse. Thus, there is a strong need for further systematic empirical analysis of the actual level of cheating in the EU ETS.
You do not have access to this content

Urs S. Brandt and Gert T. Svendsen

Chapter 5 introduced a tentative case study of green industries in the European Union (EU) as illustrative of the potential effect of lobbying. We showed how differences in lobbying activity may have influenced the performance of two similar industries. The wind turbine industry, for example, benefits from ambitious environmental target levels for greenhouse gas (GHG) emissions reductions that will increase the future market for renewable energy. In contrast, for example, no environmental target levels exist to increase the future market shares of organic farming. Rational choice theory suggests that lobbying and group size advantages could explain the observed difference in achieving environmental target levels. In relation to product development, a rational lobbying strategy could be to lobby for an accelerated shift or switch point from subsidizing green production, and at the same time taxing non-green producers, thus reducing competition in the early stages of development. One possible reason why wind is doing better than organic farming in terms of solving the collective action problem could be the variation in group size and concentrated economic net gains for individual group members.
This content is available to you

Urs S. Brandt and Gert T. Svendsen

This content is available to you

Urs S. Brandt and Gert T. Svendsen