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| Author: | Guriev, S. Yakovlev, E. Zhuravskaya, E. |
| Title: | Interest group politics in a federation |
| Journal: | Journal of Public Economics
2010 : OCT, VOL. 94:9-10, p. 730-748 |
| Index terms: | government externalities trade barriers pressure groups panel data decentralisation Russia |
| Language: | eng |
| Abstract: | The optimal degree of decentralization depends on the importance of local policies' inter-state externalities. We demonstrate that they are determined by the spatial distribution of interest groups in the country. Groups having multi-state scope internalize inter-state externalities more than those lobbyists with interests within a single state. Variation in the geographic boundaries of politically-powerful industrial interests is used to estimate how inter-state externalities affect firm performance. Using firm-level panel data from a peripheralized federation, Russia in the period of 19962003, we prove that, controlling for firm fixed impacts, the firm performance substantially improves as the number of neighboring regions under influence of multi-regional business groups increases, compared to the number influenced by local business groups. The findings have implications for the literature on federalism and on international trade, due to trade restrictions as a common source of inter-state externalities. |
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