Working Paper, Department of Economics, Uppsala University 2008:2
This paper first formulates a model of how the politicians in a local government collectively lobby to raise intergovernmental grants to their local government. The model identifies a relationship between council size and grants received. I then study this relationship empirically using the distribution of intergovernmental grants to the Swedish local governments. I use a fuzzy regression-discontinuity design that exploits a council size law to isolate exogenous variation in council size and find a large negative council size effect. This pattern provides indirect evidence for the occurrence of lobbying. The direction of the effect could be explained by free-riding incentives in individual lobbying effort contribution caused by a collective action problem in grant-raising among local government politicians.
lobbying rent-seeking collective action problem group size paradox local governments intergovernmental grants regression-discontinuity