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Lobbying and the power of multinational firms


Polk, Andreas; Schmutzler, Armin; Müller, Adrian (2014). Lobbying and the power of multinational firms. European Journal of Political Economy, 36:209-227.

Abstract

Can multinational firms exert more power than national firms by influencing politics through lobbying? To answer this question, we analyze the extent of national environmental regulation when policy is determined in a lobbying game between a government and a firm. We compare the resulting equilibrium regulation levels, outputs and welfare in a game with a multinational firm with those in an otherwise identical game with a national firm. For low transportation costs, output and pollution of a national firm are always as least as high as for a multinational; this changes for high transportation costs and intermediate damage parameters. When there is no lobbying, welfare levels are always higher with multinationals than with national firms. However, the existence of lobbying may reverse this ordering.

Abstract

Can multinational firms exert more power than national firms by influencing politics through lobbying? To answer this question, we analyze the extent of national environmental regulation when policy is determined in a lobbying game between a government and a firm. We compare the resulting equilibrium regulation levels, outputs and welfare in a game with a multinational firm with those in an otherwise identical game with a national firm. For low transportation costs, output and pollution of a national firm are always as least as high as for a multinational; this changes for high transportation costs and intermediate damage parameters. When there is no lobbying, welfare levels are always higher with multinationals than with national firms. However, the existence of lobbying may reverse this ordering.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Multinational enterprises, regulation, pollution, lobbying, interest groups, foreign direct investment
Language:English
Date:December 2014
Deposited On:20 Jan 2015 15:24
Last Modified:05 Apr 2016 18:50
Publisher:Elsevier
ISSN:0176-2680
Publisher DOI:https://doi.org/10.1016/j.ejpoleco.2014.07.010
Related URLs:http://dx.doi.org/10.5167/uzh-51791

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