The Choice of Lobbying Strategy: Direct Contacts with Officials or Mediation Via Business Associations

Abstract

The influence of lobbying activity on economic growth and welfare is widely observed in the literature. Many scholars consider lobbying as a sort of rent-seeking and blame it for non-optimal redistribution of assets, additional costs for firms, and resource reallocation from productive activities to lobbying activities. Lobbying may result in policies and regulations that benefit a small range of firms at the cost of others. Yet some scholars argue that under some conditions lobbying may benefit society, or at least result in second-best optimality. The total outcome of lobbying should depend on how it proceeds.Although the literature on lobbying is vast and multifaceted, many studies investigate how firms choose among different lobbying strategies. This study contributes to the literature by investigating how Russian firms choose ways of lobbying. The results of the study are based on a 1000-firm survey conducted by the Higher School of Economics and the Levada Center. The study investigates channels of lobbying mentioned by the respondents and focuses on the two most common channels, which are having direct contacts with officials and collective lobbying through business associations.The findings of the study are as follows. First, the data show that these lobbying channels are more likely to be complements. Second, a comparison of the effectiveness of different channels shows that the most common ways of lobbying are also the most effective. Moreover, the effectiveness of associations and personal contacts turned out to be statistically similar. Firms that have personal connections use direct personal contacts more often. But those who have problems with access to state officials tend to use business associations. Finally, the data show that those firms that interact with officials experience a higher risk of being captured by them.