Interest Group Politics in a Federation
Copyright policy )Interest Group Politics in a Federation
The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by the spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state externalities to a larger extent than the lobbyists with interests within a single state. We use variation in the geographic boundaries of politically-powerful industrial interests to estimate the effect of inter-state externalities on firm performance. Using firm-level panel data from a peripheralized federation, Russia in 1996-2003, we show that, controlling for firm fixed effects, the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi-regional business groups compared to the number influenced by local business groups. Our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter-state externalities.
Federalism, 330, JEL: F - International Economics/F.F2 - International Factor Movements and International Business/F.F2.F23 - Multinational Firms • International Business, Inter-state trade barriers, JEL: P - Economic Systems/P.P2 - Socialist Systems and Transitional Economies/P.P2.P26 - Political Economy • Property Rights, D.D7.D78 - Positive Analysis of Policy Formulation and Implementation, Multinational firms, JEL: F - International Economics/F.F1 - Trade/F.F1.F15 - Economic Integration, JEL: D - Microeconomics/D.D7 - Analysis of Collective Decision-Making/D.D7.D78 - Positive Analysis of Policy Formulation and Implementation, [SHS.ECO] Humanities and Social Sciences/Economics and Finance, F.F2.F23 - Multinational Firms • International Business, Interest groups, Federalism; Inter-jurisdictional externalities; Inter-state trade barriers; Interest groups; Multinational firms, JEL: H - Public Economics/H.H7 - State and Local Government • Intergovernmental Relations/H.H7.H77 - Intergovernmental Relations • Federalism • Secession, [SHS.ECO]Humanities and Social Sciences/Economics and Finance, Inter-jurisdictional externalities, F.F1.F15 - Economic Integration, P.P2.P26 - Political Economy • Property Rights, H.H7.H77 - Intergovernmental Relations • Federalism • Secession, jel: jel:F23, jel: jel:P26, jel: jel:D78, jel: jel:H77, jel: jel:F15
Federalism, 330, JEL: F - International Economics/F.F2 - International Factor Movements and International Business/F.F2.F23 - Multinational Firms • International Business, Inter-state trade barriers, JEL: P - Economic Systems/P.P2 - Socialist Systems and Transitional Economies/P.P2.P26 - Political Economy • Property Rights, D.D7.D78 - Positive Analysis of Policy Formulation and Implementation, Multinational firms, JEL: F - International Economics/F.F1 - Trade/F.F1.F15 - Economic Integration, JEL: D - Microeconomics/D.D7 - Analysis of Collective Decision-Making/D.D7.D78 - Positive Analysis of Policy Formulation and Implementation, [SHS.ECO] Humanities and Social Sciences/Economics and Finance, F.F2.F23 - Multinational Firms • International Business, Interest groups, Federalism; Inter-jurisdictional externalities; Inter-state trade barriers; Interest groups; Multinational firms, JEL: H - Public Economics/H.H7 - State and Local Government • Intergovernmental Relations/H.H7.H77 - Intergovernmental Relations • Federalism • Secession, [SHS.ECO]Humanities and Social Sciences/Economics and Finance, Inter-jurisdictional externalities, F.F1.F15 - Economic Integration, P.P2.P26 - Political Economy • Property Rights, H.H7.H77 - Intergovernmental Relations • Federalism • Secession, jel: jel:F23, jel: jel:P26, jel: jel:D78, jel: jel:H77, jel: jel:F15
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