DP4313 Lobbying, Information Transmission and Unequal Representation

Author(s): Lars Frisell, Johan N. M. Lagerlöf
Publication Date: March 2004
Keyword(s): bias, inequality, information transmission, interest groups, lobbying, representation, reputation
JEL(s): D72, D78, D82
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4313

We study the effects of unequal representation in the interest-group system on the degree of information transmission between a lobbyist and a policy-maker. Employing a dynamic cheap-talk model in which the lobbyist cares instrumentally about his reputation for truth telling, we show that the larger the inequality, the less information can credibly be transmitted to the policy-maker. We also investigate the effects of inequality on welfare, and discuss the welfare effects of institutions that increase transparency but which, as an unintended side effect, lower the lobbyist?s incentives for truth telling.