Coordination and conflict among interest groups

We develop a formal model of interest group politics, in which we endogenize the level of coordination and centralization chosen by (collections of) interest groups. More specifically, our model has two stages. The second stage is a standard interest group model with one novel feature: the nature of the interaction between groups and legislators depends on the legislative institutions of the country. That is, the ability of different types of groups to shape legislation according to their preferences varies with the institutional setting. In the first stage, all (potential) groups face a decision on whether to participate in the second-stage influence game. Furthermore, the groups that do choose to participate in the second-stage game also jointly and simultaneously have to decide at which level of aggregation (centralization) to participate. This model delivers two key insights. First, the institutional features of a country are shown to affect the incentives of interest groups to participate in centralized organizations that coordinate the actions of the member groups. Secondly, the model delivers a multiplicity of equilibria. That is, we show that even if two countries have similar economic characteristics and political institutions they may find themselves in outcomes with different levels of interest group centralization. We then compare these insights to real-world interest group structures, analyzing both European and (South as well as North) American nations. We show that our theoretical results are consistent with several key aspects of the observed variation in interest group politics across countries. While the cross-country econometric analysis is still work in progress (and some of it will be left to a second paper), we here argue qualitatively that the multiplicity of equilibria can explain variation within several country pairs where there is otherwise no reason to expect differences in coordination among interest groups.