Interest groups and economic performance: some new evidence

Abstract

Provided in Cooperation with:Fächergruppe Volkswirtschaftslehre, Helmut-Schmidt-Universität (HSU) Mancur Olson's theory of the decline of nations is path-breaking in political economics. It has been tested cross-sectionally in numerous empirical studies. We survey the existing results briefly, with a special focus on studies using the number of lobbies as an exogenous variable. Using data from the period 1973-2006, we then present the field's first time-series analysis of the effects of the number of interest groups on the German lobby list and macroeconomic performance, gauged in terms of economic growth and inflation. The number of interest groups (as a proxy for their influence) is shown to have an important impact on macrovariables: Interest group activity significantly leads to a decline in the growth rate and a rise in the inflation rate.JEL-Klassifikation/ JEL-Classification: D61, D72, D78

Short- and Long-Term Growth Effects of Special Interest Groups in the U.S. States: A Dynamic Panel Error-Correction Approach

“…The income inequality variable (GINI) indicates a strong positive long-run impact on growth in all three of the estimators. This is consistent with the findings of Partridge (1997 and2005) for the U.S. states, as well as the results obtained by Knack (2003), Horgos andZimmermann (2009), andRossignoli (2013). However, the interactive term between income inequality and SIGs activity (GINI x SIGs) shows a negative long-run effect in all three estimators though significantly so in only the PMG and the MG.…”

“…(iii) Much of the benefits from the rent-seeking and lobbying activities of SIGs are likely to accrue to the richer groups in society (e.g., labor unions), resulting in increased income inequality (Knack (2003), Horgos andZimmermann (2009), andRossignoli (2013)) which, in turn, enhances growth, based on argument (ii) above. This suggests that SIGs activity affects income distribution (cf., Coates, Heckelman, ans Wilson (2011)).…”

The nexus between corruption and capital account restrictions

“…Heckelman (2000Heckelman ( , 2007 and Horgos and Zimmermann (2009) provide recent evidence that interest group activity significantly decreases the rates of growth and inflation. 34 Hence, the welfare costs of the restrictions-corruption spiral could well be even higher than described in our model.…”

On the economics and the political economy of reforms

“…He contrasts their improved economic growth with a much worse performance of Britain, where there were no sharp discontinuities in the accumulation of distributional coalitions. Olson's work has spurred a substantial empirical research which has had -to some extent -supported his theory (Horgos and Zimmerman, 2009). …”