Lobbying and Corruption Dr James Tremewan - - PowerPoint PPT Presentation

Lobbying and Corruption

Dr James Tremewan (james.tremewan@univie.ac.at) Transparency and Lobbying

Introduction

http://www.oecd.org/gov/ethics/Lobbying-Brochure.pdf

2/21

Introduction

http://www.oecd.org/gov/ethics/Lobbying-Brochure.pdf

3/21

Introduction

Transparency

• It is a common view (even amongst politicians and lobbyists!)

that increasing the degree of transparency of lobbying is desirable.

• Necessary to identify undue influence of vested interests in

policy decisions.

• Reveals policymakers’ conflicts of interest.
• Increases public confidence in democracy/policymaking.
• Policymakers may want to know who is funding lobbyists, e.g.

to identify whether pressure comes from domestic public opinion

• r foreign interests.
• Yet only one third of OECD countries have government

regulation of lobbying (as of 2013). Regulations vary widely across countries, e.g. mandatory (Canada and US) or voluntary (France).

4/21

Introduction

Arguments Against Transparency

• Compulsory disclosure of conflicts of interest may reduce

pressure for prohibition of such conflicts:

• US Senator Philip Hart claimed disclosure works by “revealing

the possibility of . . . conflict, leaving it to the voter to decide whether the conflict has influenced the official acts of the congressman or senator.”

• Voters may be unable to infer how lobbying has affected

policymaker/regulator:

• Disclosure of lobbying could increase (unwarranted)

trust/mistrust.

• Lobbyists/politicians who suspect that people who know of

financial arrangements discount their information may be encouraged to exaggerate even more.

• ”Moral licensing”: people feel worse about taking advantage of
• thers who are unaware. Transparency reduces moral costs.
• May discourage submission of useful but commercially sensitive

information.

5/21

Introduction

Examples

• Example 1 (Interest Group, Politician, Voter):
• Politician must decide whether to support or oppose gun control

and knows which is best for society.

• NRA will fund Politician’s electoral campaign if they oppose it.
• Voter’s must decide whether to believe Politician’s statements

about impact of gun control, and if to vote for him/her.

• Voters may or may not know about donations from NRA,

depending on campaign-financing laws.

• Example 2 (Interest Group, Research Institute, Regulator):
• In 2013, the US Occupational Safety and Health Administration

began public consultation on setting limits on working with silica dust (a major hazard to construction workers).

• For the first time they requested that those submitting evidence

should declare their funding sources.

• A group of senators protested, claiming revealing funding

sources would bias the OSHA’s evaluations of submissions.

6/21

Introduction

Model: Timeline

• A lobbyist wants a particular policy implemented (B) and offers

a politician a payment of 4 if they recommend this policy.

• Lobbyist’s interests may diverge or coincide with voters’

(politician’s private information).

• Timeline:
• ”Nature” chooses

s =

• L,

w.p. 2/5 (interests diverge) R,

• therwise (interests coincide)
• The politician observes the true state of the world (L or R) and

chooses whether to accept the payment and recomend B (full commitment assumed), or refuse payment and recommend either A or B.

• The voter observes only the action of the policymaker (possibly

including whether or not they accept the payment) and chooses A or B.

7/21

Introduction

Model: Payoffs

• Politician receives:
• 6 if the policy they recommend is chosen (gets elected).
• 4 if they accept the payoff.
• 1 if the policy they recommend matches the state of the world

(e.g. intrinsic motivation, or good for reputation if true state becomes common knowledge with some probability).

• Voter gets 10 if the policy that they choose matches the state of

the world and 5 otherwise.

• No Transparency (NT), voter observes only which policy is

recommended.

• Full Transparency (FT), voter observes which policy is

recommended AND whether or not the payment is accepted.

8/21

Introduction

Theoretical predictions

• Similar definition of equilibria similar to previous set of slides.
• No Transparency - only corrupt equilibrium (CE):
• Politician always takes payment and recommends B.
• Voter always follows recommendation.
• EUV = 8; EUP = 10.6; correct choice 60% of the time.
• Full Transparency - CE, and honest equilibrium (HE):
• Politician never takes the bribe, and recommends A in L and B

in R.

• Voter always follow the advice and believes that if the payment

is accepted that they are more likely to be in A.

• EUV = 10; EUP = 7; correct choice all the time.
• Why no equilibrium where politician recommends A in L, and

takes the bribe and recommends B in R?

• Voter will always follow recommendation, so politician always

has incentive to take payment in L as well.

9/21

Introduction

Research questions

• Is the best outcome (A or B) chosen more often with

transparency?

• Are voters more likely to mistrust information when the payment

has been take - are they more likely to follow a recommendation

• f B when the bribe has not been taken?
• Do politicians anticipate this, and decline the payment in R.

10/21

Introduction

Experimental Design

• 10 rounds of stranger-matching in same role. Repeat in other

role (surprise): to ensure Receivers fully understood Senders incentives.

• Two randomly chosen rounds paid from each role (2 pts = e1).
• Strategy method for Receiver:
• Easier to see if equilibrium strategies are really being played.
• Make sure we get enough observations at every information set.
• Strategy method for Senders too complicated to explain.
• Six sessions (142 subjects):
• NT: Three sessions of 24 subjects.
• FT: Two sessions of 24 subjects, one of 22.
• Two matching-groups in each session: 12 independent obs.
• All statistical tests are Mann-Whitney rank-sum tests based on

matching-group averages.

11/21

Results

Means: NT=0.77; FT=0.71 (difference not significant)

12/21

Results

Means: NT=0.49; FT=0.41 (p-value=0.0547)

13/21

Results

Means: NT=0.01; FT=0.03 (p-value=0.0505)

14/21

Results

Receiver Strategies (NT)

15/21

Results

Receiver Strategies (NT)

16/21

Results

Receiver Strategies (FT)

17/21

Results

Receiver Strategies (FT)

18/21

Results

Means: NT=0.78; FT=0.64 (p-value=0.025)

19/21

Results

Preliminary Results: Summary

• Transparency does not improve information transmission:
• In FT, correct choice made less than predicted.
• In NT, correct choice made more than predicted.
• A substantial number of Senders reject the payment to tell the

truth in L in both treatments (declining over time). There is more truth-telling in the NT treatment, consistent with “moral licensing”.

• Only a small number of Senders reject the payment and tell the

truth in R. This number declines over time, but increases again when the roles are switched. More common in the FT treatment.

• In FT, following all recommendations is modal strategy (CE).
• Very few Receivers follow when the payment is not taken, and

don’t follow when the payment is taken (HE).

• The second most common strategy is to follow a

recommendation of B when the payment is taken, but not when the payment is not taken! (honesty is suspicious?)

20/21

Results

Preliminary Conclusions

• Transparency fails to induce Senders to tell the truth (in fact

they lie a little bit more).

• Possible explanations:
• Moral license (see earlier slide).
• It seems that some Senders initially believe that they need to

decline the payment to be believed in R, as hypothesised. However, as they encounter the (strange?) strategy of Receivers

• nly believing them if they take the payment, they start

accepting the payment more often.

• Lying aversion means a large number of senders decline the

bribe in L to tell the truth, but take the payment in R as they can still tell the truth. Receivers recognise this so are willing to follow recommendations of B even when the payment is taken (and some Senders take advantage of this and take the payment all the time).... honesty destroys the honest equilibrium!

21/21