An examination of the factors affecting the formation of interest groups in OECD countries

Abstract

Perhaps the best way to summarize the empirical results is to classify the hypotheses into three groups: those which can be readily accepted because they are supported in all tests; those which can be readily rejected because no test results support them; and those upon which one should remain agnostic because the test results are not consistent. In the first group are population (POP), decentralization of government (DCNT), and length of time of modernization (DATE). One can state quite confidently that these three variables are determinants of interest group activity. In the second group are the variables measuring characteristics of the political system (POLY, DEM1, DEM2, PFRC). One can with ease reject the hypotheses to which these variables are relevant. There is a large group of variables which stand in the middle group. However, for these variables there are gradations of success in the tests. The variables on socioeconomic development (INC, AGRI, NEWS) and number of industries and political subdivisions (NIND, REGP) are only significant in the one variable tests. Especially important is their failure to obtain the correct signs in the tests reported in Table 3. The variables on ethnic fractionalization (EFRC) and Olson's hypothesis on destruction of groups (NDFO) have the correct signs in Table 3 and are significant in Table 1. Thus, it is more difficult to reject EFRC and NDFO as determinants of interest group activity than INC, NIND and REGP. Finally, it should be mentioned that once appropriate simultaneous equations techniques are applied, government size is no longer supported as a significant variable. This paper will conclude with comments of a more conjectural nature on the implications of the results in the case of three specific variables. First, the results on hypothesis 3 suggest that population affects the number of interest groups independently of indirect effects through other variables. This direct effect occurs because groups become proportionately smaller and more homogeneous as population increases. Hence, one can expect the political economy of larger countries to be significantly different from that of smaller countries. The results suggest that larger countries will have a denser array of interest groups and that these groups, because of their homogeneity, will find it easier to decide on and pursue policies in the narrow interests of their members. Secondly, the results support Olson's claim that there will be a gradual accumulation of interest groups in developed democracies. Given that Olson attributes to interest groups a large role in determining the economic fortunes of a country, the fact that his accumulation hypothesis is supported is a result of some significance. Finally, if one accepts the two-stage least squares results, it has been shown that changes in government size do not induce changes in interest group activity. An important conclusion can be reached when this result is taken in combination with the results of other studies which show that interest groups induce changes in the size of government (McCormick and Tollison, 1981; and Mueller and Murrell, 1983). These results do not support the ‘capture’ theory of government — that governmental institutions are created, perhaps in the public interest, and then dominated by interest groups. Rather the results support the theory that the institutions themselves are the creatures of interest group activity.