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Cover of: Interest Groups, Economic Competition, and Endogenous Public Policy
Yu-Bong Lai

Interest Groups, Economic Competition, and Endogenous Public Policy

Section: Articles
Volume 159 (2003) / Issue 2, pp. 342-361 (20)
Published 09.07.2018
DOI 10.1628/0932456032974817
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Summary
A common-agency model is constructed to investigate how two interest groups – a workers' group and an environmentalists' group – affect the formation of a capital tax and an environmental policy. The political power of interest groups, which is related to the free-rider problem that they face, is crucial in deciding these policies. This paper depicts the conditions under which either NIMBY or a race to the bottom occurs. Moreover, this paper examines whether the equivalence between a pollution tax and a pollution standard is sustained despite interference from interest groups.