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- W1479721042 abstract "This paper uses a large cross-country survey of business firms to assess their influence on government policies. When controlling for endogeneity, we find that such an influence is associated with larger firms and to a lesser extent with government ownership, but not with the degree of competition. We also find that firms’ perception of being politically influential is enhanced with the country’s level of institutional quality. TWO DIAMETRICALLY opposite influential theories speculate about the motivation and rationale of government intervention in the economy. The public interest theory, put forward in Pigou (1938), states that the government acts to achieve social benefit and to correct market failures. In contrast, the capture theory, originated in Stigler (1971), hypothesizes that the government is an agent of powerful commercial interests; 1 similar arguments come out of the rent-seeking literature (Krueger, 1974). These competing views and some of their implications are discussed in depth in Glaeser and Shleifer (2003). In reality, however, government policies rarely correspond to either of the two extremes. Progressive income taxation, uniform public education, and old age policies, as well as air pollution regulations, are all examples of public interestminded approaches, and they are commonly used across countries. In contrast, monopoly regulation, trade policies, or financial regulations are often viewed as being, to a large extent, influenced by commercial interests, the degree of which may in principle vary significantly across countries. In the light of these considerations, it seems useful to characterize the circumstances of firms’ influence over government policies. In particular, one issue is the profile of politically influential firms; specifically, what characteristics make firms more likely to exert political influence? Another interesting issue is identifying the extent to which these firms stand to disproportionately gain and the policy aspects that are especially prone to political influence. In particular, to the extent that government policies are found to be responsive to the influence of business firms, this would provide support for Stigler’s (1971) view of government intervention." @default.
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- W1479721042 date "2009-08-24" @default.
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- W1479721042 title "FIRM-LEVEL DETERMINANTS OF POLITICAL INFLUENCE" @default.
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- W1479721042 doi "https://doi.org/10.1111/j.1468-0343.2009.00355.x" @default.
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