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IZA Discussion Paper No. 13924
December 2020
Strategic Compromise, Policy Bundling and Interest Group Power

revised version published as 'Strategic compromise, policy bundling and interest group power: Theory and evidence on education policy' in: European Journal of Political Economy, 2023, 77, 102283

Policy reforms are often multifaceted. In the rent-seeking literature policies are usually taken as one-dimensional. This paper models policy formation using a political contest with endogenous policy proposals containing two dimensions. The two dimensions provide an opportunity to trade off one policy over another to make the lobbying opposition less aggressive. In a first stage, the Government proposes a reform over the two policies, and in a second stage engages in a contest with an Interest Group over the enactment of the proposed reform. As a result, the Government makes a compromise, under-proposing in the policy the Interest Group opposes and over-proposing in the policy the Interest Group desires. Effectively, there will be strategic bundling of desired policies with undesired ones in an attempt to increase enactment probability and overall utility.

Kommunikation
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer@liser.lu
+352 585-855-501
Netzwerkkoordination
Christina Gathmann
christina.gathmann@liser.lu

Das IZA@LISER-Netzwerk ist eine weltweite Gemeinschaft für exzellente Forschung in der Arbeitsmarktökonomie und angrenzenden Fachgebieten. Nach dem Wechsel von Bonn wird das Netzwerk nun am Luxembourg Institute of Socio-Economic Research (LISER) koordiniert.

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