The Effect of the Number of Size of Interest Groups on Social Rent Dissipation

Public Choice, Vol. 101, Issue 3-4, December 1999

Posted: 14 Jan 2000

See all articles by Guang-Zhen Sun

Guang-Zhen Sun

Monash University - Department of Economics; Max Planck Institute for Research Into Economic Systems

Yew-Kwang Ng

Monash University - Department of Economics

Abstract

We develop two models in this paper to investigate the social welfare implication of the number and size of interest groups. The first model analyzes the case in which individuals in each group ignore the effect of the lobbying effect on the size of the aggregate output of the economy. It is demonstrated that the social rent dissipation is lower the larger is the number of interest groups (the smaller is the size of each group in the symmetric case) and that there exists an inverse relation between the social rent dissipation and the extent of egalitarianism of within-group rent sharing rules. The second model examine the case wherein the individual in each group takes account of the effect of lobbying activities on the Big Pie (the aggregate output). An interesting inverted- "U" shape relationship between the number of symmetric interest groups and the social rent dissipation is demonstrated. The rent dissipation increases with the group number when there are very few groups and decreases with the group number once the latter exceeds some critical value. Intuitively, when the number of groups is small, the Big Pie effect in producing the aggregate output is significant and dominates the "group-size" effect in lobbying; when the group number is big, the Big Pie effect is insignificant and therefore is dominated by the "group-size" lobbying effect. The policy implication and some possible generalizations are also briefly discussed.

Note: This is a description of the paper and not the actual abstract.

JEL Classification: C72, D72, H00

Suggested Citation

Sun, Guang-Zhen and Ng, Yew-Kwang, The Effect of the Number of Size of Interest Groups on Social Rent Dissipation. Public Choice, Vol. 101, Issue 3-4, December 1999, Available at SSRN: https://ssrn.com/abstract=203488

Guang-Zhen Sun (Contact Author)

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia
61-3-99052409 (Phone)
61-3-99055476 (Fax)

Max Planck Institute for Research Into Economic Systems

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

Yew-Kwang Ng

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia
+61 3 9905 2309 (Phone)
+61 3 9905 5476 (Fax)

HOME PAGE: http://www-personal.buseco.monash.edu.au/~kwangng

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