A Model of Lobbying and Social Welfare

Abstract

Lobbying is an immense part of the political process. The ability for firms and industries to influence public policy, however, has been seen as a societal ill – even when it benefits the industry. This paper investigates how different types of lobbying affects industries as well as society as a whole. This is one of the first papers in this field of research to investigate societal effects. The results vary by type of lobbying. Protection and regulation lobbying benefit the industry but harm society as a whole. Subsidy lobbying benefits both industry and society given that the government’s additional subsidy expenditure comes from a surplus. If not, society’s welfare is the same as it is shifting subsidy from one industry to another. Using these results, policy suggestions would be to move away from protectionism and removing regulation as a society benefitting technique to using subsidies to boost industries.