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  3. American Economic Journal: Microeconomics
  4. November 2017
  5. Centralized Decision Making and Informed Lobbying

Centralized Decision Making and Informed Lobbying

  • Rafael Costa Lima
  • Humberto Moreira
  • Thierry Verdier
American Economic Journal: Microeconomics
vol. 9, no. 4, November 2017
(pp. 324-55)
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Abstract

We address the trade-off between centralized and decentralized decision making subject to influence from privately informed lobbies. We focus on informative equilibria with separating differentiable contribution schedules and identify an information transmission effect under centralized structures. Such effect decreases capture and increases welfare when lobbies have "aligned preferences." The opposite effect holds for "polarized preferences." We present two examples of this framework: local public goods and customs union agreements. Finally, we compare the policy outcomes from this political economy perspective to those under a normative mechanism design approach, and extend our analysis to the discussion of pooling equilibria.

Citation

Lima, Rafael Costa, Humberto Moreira, and Thierry Verdier. 2017. "Centralized Decision Making and Informed Lobbying." American Economic Journal: Microeconomics, 9 (4): 324-55. DOI: 10.1257/mic.20150253

Additional Materials

JEL Classification

  • D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
  • D82 Asymmetric and Private Information; Mechanism Design
  • F13 Trade Policy; International Trade Organizations
  • F15 Economic Integration
  • H41 Public Goods
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