The name is absent



Thus the lobby will only support a party that offers its members a higher level
of economic welfare than the other party. Moreover, Appendix 1 shows that the
probability that party
A will win the election is

pA = + + αipi (UA - uB) + (1 - αi) po (UA - UB) ,       (2.20)

2

0 αi < 1,pi = ψ + αiψ2h2,    po = ψ.

In other words, the greater an insider’s economic welfare implied by the policy
of party
A, the greater is the likelihood that he will vote for that party, given
the economic policy package offered by party
B . In a similar way, party A can
increase its voter support from outsiders by choosing a fiscal policy platform that
increases the (expected) economic welfare of members of that goup of voters.

Maximisation of pA, given UiB and UoB , gives party A’s best response to the
policy chosen by party
B . The latter party faces the symmetric problem of maxim-
ising
1 - pA , yielding similar first-order conditions and an identical best-response
function. In Nash equilibrium the two parties therefore end up choosing the same
fiscal policy platforms implying
UiA - UiB =0, so according to (2.19) the public
sector lobby will not want to offer any campaign contributions in political equilib-
rium.10 Thus the political influence of the lobby derives from the
potential rather
than from the
actual political support that it offers.

The economic welfare of an insider is simply equal to the utility of a public
sector worker
(Ug), that is, Ui = Ug = u (W + rk) + g (G) (since both parties
choose the same policy in equilibrium, we no longer attach party superscripts to
any variables). The expected economic welfare of an outsider,
Uo , depends on
the probability that he will be able to get one of the high-paying public sector
jobs that have not already been reserved for the lobby insiders. For simplicity we
assume that all outsiders face the same probability of getting one of the marginal
public sector jobs, as if these jobs were allocated by a lottery. The total number
of public sector jobs is
α of which αi are reserved for the lobby members.
Hence
(α - αi ) is the number of public sector jobs offered to outsiders, and 1 - αi
is the number of outsiders competing for those jobs. Thus, at the time of voting,

10 This is why our model specification in section 2.3 did not explicitly allow for lobby activities
as one possible use of the economy’s resources.

14



More intriguing information

1. The name is absent
2. Review of “From Political Economy to Economics: Method, the Social and Historical Evolution of Economic Theory”
3. DIVERSITY OF RURAL PLACES - TEXAS
4. The name is absent
5. Tourism in Rural Areas and Regional Development Planning
6. Business Networks and Performance: A Spatial Approach
7. The name is absent
8. Environmental Regulation, Market Power and Price Discrimination in the Agricultural Chemical Industry
9. BUSINESS SUCCESS: WHAT FACTORS REALLY MATTER?
10. Does Market Concentration Promote or Reduce New Product Introductions? Evidence from US Food Industry
11. The Composition of Government Spending and the Real Exchange Rate
12. Restricted Export Flexibility and Risk Management with Options and Futures
13. The name is absent
14. The name is absent
15. Determinants of U.S. Textile and Apparel Import Trade
16. Motivations, Values and Emotions: Three Sides of the same Coin
17. FDI Implications of Recent European Court of Justice Decision on Corporation Tax Matters
18. What Contribution Can Residential Field Courses Make to the Education of 11-14 Year-olds?
19. The name is absent
20. Trade Liberalization, Firm Performance and Labour Market Outcomes in the Developing World: What Can We Learn from Micro-LevelData?