Political ownership and the behaviour of special interest groups

Chapter 1. Political involvement in the operation of an enterprise, whether privately or state owned, creates opportunities for interest groups to influence the allocation of resources. I analyze how the influence externality arising from the interest groups' lobby activities invalidates the Coase Theorem. Then I proceed to investigate how the allocation of property rights between a government and a group of private owners determines the equilibrium allocation of resources in a firm. In other words, I provide a theory of why ownership matters.; Chapter 2. I analyze how lobby groups influence output and employment levels in government controlled enterprises and derive three implications from this observation. First, it is shown that lobby groups can have a significant impact on resource allocation even if they do not make any contributions to political parties in equilibrium. Second, the ability of government controlled enterprises to correct market failures depends on if this correction is aligned with the interests of the lobby groups. Finally, the distribution of cash flow rights between the government and private owners affects the level of output and employment in the enterprise.; Chapter 3 (Joint with Sven Feldmann). Interest groups can influence political decisions in two distinct ways: by offering contributions to political actors and by providing them with relevant information that is advantageous for the group. We analyze the conditions under which interest groups are more inclined to use one or the other channel of influence. First, we identify an indirect cost of searching for information in the form of an information externality that increases the cost of offering contributions. We then show that an extreme interest group might find it beneficial to abandon information search altogether and instead seek influence solely via contributions. Thus, our analysis lends support to a rather cynical view of lobbying wherein groups provide little or no useful information.