Business Associations, Lobbying, and Welfare
Abstract: Are business associations - private, formal, nonprofit organizations designed to promote the common interests of their members - positive or negative for the economy and overall welfare? Scholars from new institutional economics, on the one side, and industrial organization, law & economics, and public choice, on the other side, have given different answers to this question, which is instrumental for policy making. We construct a model that endogenizes association membership of firms and the main functions of associations, which can have positive or negative spillovers for the economy. We derive predictions regarding associations' functions and their net welfare effects, depending on the level of property rights securitization, which are in line with empirical observations.
