Working Paper Series, Department of Economics, Copenhagen Business School
Morten Bennedsen and Sven E. Feldmann
INFORMATIONAL LOBBYING AND POLITICAL CONTRIBUTIONS
Abstract: Interest groups can influence political decisions in two
by offering contributions to political actors and by
providing them with relevant information that is favorable for the group.
We analyze the conditions under which interest groups are more inclined to
use one or the other channel of influence. First, we identify an indirect
cost of searching for information in the form of an information externality
that increases the cost of offering contributions. We then show that an
extreme interest group might find it beneficial to abandon information
provision altogether and instead seek influence solely via contributions.
Finally, we apply our model to cast doubt on the "conventional wisdom" that
competition among information providers increases the amount of information
provided: when the identified information externality is taken into
account, wee show that competition decreases information search. Thus, our
analysis lends support to a rather cynical view of lobbying wherein lobby
groups provide little or no useful information to the political process.
Keywords: Informational lobbying; Political contributions; Information externalities; (follow links to similar papers)
JEL-Codes: H89; (follow links to similar papers)
34 pages, June 1, 2000
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