Buy, Lobby or Sue: Interest Groups' Participation in Policy Making - A Selective Survey

The participation of interest groups in public policy making is unavoidable. Its unavoidable nature is only matched by the universal suspicion with which it has been seen by both policy makers and the public. Recently, however, there has been a growing literature that examines the participation of interest groups in public policy making from a New Institutional Economics perspective. The distinguishing feature of the New Institutional Economics Approach is its emphasis in opening up the black box of decision-making, whether in understanding the rules of the game, or the play of the game. In this paper we do not attempt to fairly describe the vast literature on interest group's behavior. Instead, the purpose of this essay for the New Institutional Economics Guide Book is to review recent papers that follow the NIE mantra. That is, they attempt to explicate the micro-analytic features of the way interest groups actually interact with policy-makers, rather than providing an abstract high-level representation. We emphasize the role of the institutional environment in understanding interest groups' strategies.

Three Essays in Political Economy and Public Policy

Chapter 1: In the last two decades, public agencies have started to include performance pay into their compensation structure. Using a survey data of all law enforcement agencies in the Unites States, this chapter investigates: (1) if the adoption of performance pay by agencies affected their ability to fight crime and (2) whether agencies responded to performance pay adoption by shifting their policing strategies to game the change? We find that despite increases in the pay gap, performance pay adoption resulted in no change in the police's ability to fight crime. We find little evidence that adopting agencies attempted to game the incentive structure by shifting efforts away from less profitable tasks.Chapter 2: There has been much debate over whether interest groups act as ideologues or investor when they contribute to candidates. In a seminal work, Snyder (1990) finds that economic interest groups behave as investors and there is a one to one correlation between candidates' share of contribution from economic interest groups and their probability of winning. This chapter expands on Snyder's work by proposing a new strategy to empirically identify investor interest groups, that is, by examining whether an interest group has ever given to competing parties in a race, we call this group "diversifiers". We find that there is indeed a significant correlation between diversifier contribution share and election outcome. Furthermore, the correlation between diversifiers contribution share to date and election outcome remains significant as early as approximately 48 weeks before election day.Chapter 3: Participation of interest groups in public policy making is ubiquitous and unavoidable. In this final chapter, we try to understand the mechanisms through which interest groups attempt to influence the implementation of public policies from an Institutional Economics perspective. We recognize that while it is legislatures that enact and supervise statures, it is often bureaucracies that implement policies. We survey a collection of papers that analyze how the vast power invested in bureaucracies influence the strategic choice of interest group in means to exert influence - buying, lobbying and suing. We further generalize our analysis to understand how differences in the institutional environment impact the role of interest groups in public policy making