Working Paper: CEPR ID: DP6233
Authors: Didier Laussel; Tanguy Van Ypersele
Abstract: In the present paper, we analyze an original channel of interaction between politicians and lobbies i.e. the nuisance power of a lobby. Some lobbies are influencing public policies just because they are able to impact negatively the image of a politician. More particularly, we develop a setting in which unions may transmit some information to the voters about the quality of the government via a costly signal i.e. a strike. In our setting unions represent sectors of the economy.An incumbent government seeking reelection allocates a fixed budget among several unionized sectors. Strikes are costly and transmit information to voters about the quality of the government. The politician may have interest to distort the budget allocation away from the efficient one in order to maximize his/her probability of reelection. In most cases a hostile receive receives more than a neutral/friendly one.
Keywords: Lobby; Political Economy; Strike
JEL Codes: D7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unions influence public policy by threatening strikes (J58) | Government budget allocations are distorted (H61) |
| Government budget allocations are distorted (H61) | Government seeks to appease unions and maximize reelection chances (J58) |
| Hostile unions receive more favorable budget allocations (J51) | Government minimizes strike risks (J52) |
| Bias against the government in unions (J58) | Likelihood of strikes increases (J52) |
| Likelihood of strikes increases (J52) | Distortion in budget allocation occurs (H61) |
| Good government risks being overthrown (D72) | Cannot manage biases of hostile unions (J51) |