Strategic Legislative Subsidies: Informational Lobbying and the Cost of Policy

Strategic Legislative Subsidies: Informational Lobbying and the Cost of Policy

By Christopher J. Ellis, University of Oregon and Thomas Groll, Columbia University

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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