It Takes Two to Tango: Lobbies and the Political Business Cycle

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. With interest groups significantly affecting economic performance (according to Mancur Olson) and a vital interest of governments in economic growth and low unemployment in order to win elections, there should be a link between political business cycles and the evolution of lobbies over time which has totally been ignored in the literature up to now. In modeling this link in a theoretical and empirical way we try to answer two questions: Is it possible to interpret Olson´s Law of Interest Groups not only as a long run phenomenon but also in a short-run perspective, integrating it into the theory of political business cycles? And: is there any empirical evidence that a typical pattern of lobby behavior and macroeconomic status exists which is consistent over a couple of election periods? In order to investigate these issues, we first analyze some literature that is usually ignored in the more technical contributions evaluating Olson´s law, but proves to be highly important as background for answering the above mentioned questions. We then illustrate how a model consisting of Olson´s interest-groups theory and the endeavors of governments to win the majority of votes in elections could look like, before we perform a time-series-analysis based on the lobby-list of the German Bundestag in order to gain some more insights into the relationships between lobbies, governments and voters. As a result we discover a consistent behavior of the lobbies over the cycle that boils down to some kind of non-aggression pact between the lobbies and the governments irrespective of their political alignments. Terms of use: Documents inJEL-Klassifikation / JEL-Classification: D72, D78

Political business cycles 40 years after Nordhaus

“…I have probably missed some studies like these. Finally, I note that PBCs, explicitly related or not to Nordhaus (1975), have been investigated in somewhat exotic areas (compared to economics): Wasserman (1983) in relation to suicides, Nincic (1990) and Gaubatz (1991) in international relations, Shughart and Tollison (1985), Lagona and Padovano (2008) and Brechler and Gersl (2014) in legislative activity, Block and Vaaler (2004) in ratings published by agencies, Thies and Porche (2007) in agricultural producer protection, Ladewig (2008) in the housing market, Horgos and Zimmermann (2010) in the activity of interest groups, Kachelein et al (2011) in electricity supply, and Wehner (2013) in legislative budgetary decisions. Unusual applications in the economic area include Paiva (1996) on prices in regulated industries, Castro and Veiga (2004) on the timing of stabilization programs, Dreher and Vaubel (2004) on credits from the IMF and IBRD, Ozatay (2007) on public sector prices, Faye and Niehaus (2012) on foreign aid, Sukhtankar (2012) on prices paid to farmers for sugar cane, Lami, et al (2014) on household consumption spending, and Klien (2014) on water tariffs.…”

A Model Of Cournot Competition With Lobbying

“…Horgos and Zimmermann (2009) use a longitudinal analysis to demonstrate that growth is inversely related and inflation is directly related to the number of interest groups in the economy. Furthermore, Horgos and Zimmermann (2010) show that political stability increases lobbying because lobbyists are more certain that the officials that they lobby will continue to have political influence.…”