Policy Persistence and Rent Extraction

The existing literature has shown that special interest groups can have both growth enhancing and retarding effects on an economy. In either case it is always assumed that the nature of the special interest groups remains constant over time. The hypothesis of this paper is that a dynamic relationship exists between politicians and lobbyists. A theoretical framework in which established and new lobbies overlap is developed to model the incentives a government might have to behave in a manner consistent with the hypothesis. In this structure despite the fact that they support projects from which all productive benefits have been extracted politicians are still rationally reelected.