Stigler-Olson lobbying behavior in protectionist industries: Evidence from the lobbying power function

The Stigler-Olson theory of special-interest behavior which emphasizes the free-rider problem of lobbying organization is empirically tested using as a basis the lobbying power function proposed by Magee et al. (1989). Four hypotheses that follow from the model are tested: (i) the hypothesis that the free-riding coefficient and perceived effectiveness coefficient are both positive, (ii) lobbying spending per contributing firm rises with the size of industry stakes, (iii) lobbying spending per contributing firm rises with free-riding, and (iv) lobbying spending per contributing firm falls as each firm perceives its individual action to be more effective. We use cross-industry data on PAC spending on congressional campaigns over the 4 election cycles between 1977 and 1984. An innovation in this paper is the estimation of the model using not just total PAC spending on the 1hs, but also purely trade-related PAC spending. Trade-related PAC spending is econometrically predicted from total PAC spending and serves to focus on the behavior of firms in protectionist industries. (C) 1998 Elsevier Science B.V.