Working Paper: CEPR ID: DP4313
Authors: Johan Lagerlf; Lars Frisell
Abstract: We study the effects of unequal representation in the interest-group system on the degree of information transmission between a lobbyist and a policy-maker. Employing a dynamic cheap-talk model in which the lobbyist cares instrumentally about his reputation for truth telling, we show that the larger the inequality, the less information can credibly be transmitted to the policy-maker. We also investigate the effects of inequality on welfare, and discuss the welfare effects of institutions that increase transparency but which, as an unintended side effect, lower the lobbyist?s incentives for truth telling.
Keywords: bias; inequality; information transmission; interest groups; lobbying; representation; reputation
JEL Codes: D72; D78; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Larger inequality in representation (I24) | Less credible information transmitted to policymaker (D83) |
| More equality in representation (I24) | Stronger lobbyist incentives to be truthful (D72) |
| Increased transparency measures (G38) | Reduced lobbyist incentives for truth-telling (D72) |
| Reduced lobbyist incentives for truth-telling (D72) | Less effective information transmission (D83) |