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Why are some lobby groups less benign in their external effects than others? Olson (1982) proposed that those that are less encompassing in the sense that their constituents collectively represent a narrower range of sectors are more apt to seek the types of subsidies, tariffs, tax loopholes and competition-limiting regulations that impose costs on the rest of society. But his hypothesis has to our knowledge not been directly tested. Part of the reason, we suspect, relates to the absence of adequate data. By drawing on a unique pair of surveys, targeted to both business associations (lobby groups) and their constituents, we provide what we believe to be the first direct test of Olsons hypothesis. Managers from a diverse array of Russian industrial firms and business associations were asked similar questions regarding their attitudes to policies that explicitly benefit well-defined sectoral or regional interests and, implicitly, impose external costs. The pattern of responses is striking. Managers of both the less encompassing associations and the firms that belong to such groups are much more apt to view such policies in a favorable light. More encompassing associations and the members of such organizations are relatively more skeptical of narrowly-targeted government interventions. The results, we believe, provide strong support for Olsons hypothesis.

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William Pyle

Laura Solanko

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