Public Choice

, Volume 159, Issue 1–2, pp 63–82 | Cite as

How a firm can induce legislators to adopt a bad policy

Article

Abstract

This paper shows why a majority of legislators may vote for a policy that benefits a firm but harms all legislators. The firm may induce legislators to support the policy by suggesting that it is more likely to invest in a district where voters or their representative support the policy. In equilibrium, no one vote may be decisive, so each legislator who seeks the firm’s investment votes for the policy, though all legislators would be better off if they all voted against the policy. And when votes reveal information about the district, the firm’s implicit promise or threat can be credible. Unlike influence mechanisms based on contributions or bribes, the behavior considered is time consistent and in line with the low campaign contributions by special interests.

Keywords

Lobbying Voting Special interests Credibility 

Notes

Acknowledgements

We thank three referees, the editor of the journal, seminar audiences at the University of California–San Diego and at the Katholieke Universiteit Leuven for helpful discussions and suggestions. The usual disclaimer applies. Dahm conducted this work while visiting the University of California, Irvine. Its hospitality, and financial support through the Spanish program José Castillejo, is gratefully acknowledged. Dahm acknowledges the support of the Barcelona Graduate School of Economics, of the Government of Catalonia, and of the Government of Spain under projects SEJ2007-67580-C02-01 and ECO2010-19733.

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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Department d’Economia and CREIPUniversitat Rovira i VirgiliReusSpain
  2. 2.Department of EconomicsErasmus University RotterdamRotterdamThe Netherlands
  3. 3.Tinbergen InstituteRotterdamThe Netherlands
  4. 4.CESifoMunichGermany
  5. 5.IZABonnGermany
  6. 6.Department of EconomicsUniversity of CaliforniaIrvineUSA

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