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Strategic Legislative Subsidies: Informational Lobbying and the Cost of Policy

  • CHRISTOPHER J. ELLIS (a1) and THOMAS GROLL (a2)

Abstract

We analyze the strategic considerations inherent in legislative subsidies and develop an informational lobbying model with costly policy reforms. 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. We allow both a policymaker and a lobby to gather information, and each can either fund or subsidize policymaking. Our analysis highlights that legislative subsidies are both chosen strategically by lobbyists and strategically induced by policymakers, dependent on the circumstances. These involve which resource constraints bind the policymaker’s prior beliefs, the salience of policy, and the policymaker’s and lobby’s expertise in information gathering. Our results highlight five distinct motives for informational lobbying and demonstrate that for both a lobby and policymaker, there can be strategic advantages arising from being resource-constrained.

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Corresponding author

*Christopher J. Ellis, Professor, Department of Economics, University of Oregon, cjellis@uoregon.edu.
Thomas Groll, Lecturer in Discipline, School of International and Public Affairs, Columbia University, tgroll@columbia.edu.

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We benefited greatly from the comments made by the editor and three referees. We thank Christopher Cotton, Matthias Dahm, Arnaud Dellis, Gabriele Gratton, Martin Gregor, Alexander Hertel-Fernandez, Björn Kauder, Michelle Mello, Giacomo Ponzetto, James Snyder, Francesco Trebbi, and Jonathan Woon for helpful discussions and suggestions. We also benefited from seminar participants at Harvard University, Laval University, and Queen’s University as well as participants at the IEB Workshop on Corruption, Lobbying and Public Policy 2015, the PET 15, IIPF 2015, MPSA 2016, SEA 2016, and EEA 2017 conferences. A previous version was circulated under the title “Informational Lobbying and Legislative Subsidies.” All errors are our own.

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References

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Strategic Legislative Subsidies: Informational Lobbying and the Cost of Policy

  • CHRISTOPHER J. ELLIS (a1) and THOMAS GROLL (a2)

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