DP5886 Lobbying, Corruption and Political Influence

Author(s): Nauro F. Campos , Francesco Giovannoni

Publication Date: October 2006

Keyword(s): lobbying , corruption , transition , institutions

JEL(s): D72 , E23 , H26 , O17 , P16

Programme Areas: Public Policy

Link to this Page: www.cepr.org/pubs/dps/DP5886.asp

Conventional wisdom suggests that lobbying is the preferred mean for exerting political influence in rich countries and corruption the preferred one in poor countries. Analyses of their joint effects are understandably rare. This paper provides a theoretical framework that focus on the relationship between lobbying and corruption (that is, it investigates under what conditions they are complements or substitutes). The paper also offers novel econometric evidence on lobbying, corruption and influence using data for about 4000 firms in 25 transition countries. Our results show that (a) lobbying and corruption are substitutes, if anything; (b) firm size, age, ownership, per capita GDP and political stability are important determinants of lobby membership; and (c) lobbying seems to be a much more effective instrument for political influence than corruption, even in poorer, less developed countries.