Lobbyists Promoting Development?

♠ Posted by Emmanuel in , at 7/09/2007 01:33:00 AM
My interest in this World Bank study was immediately piqued by its title, "Can Foreign Lobbying Enhance Development? The Case of Tourism in the Caribbean." With a title like that, I was expecting some interesting results. It turns out that, in this particular case at least, lobbyists in America have been instrumental in the development of the tourist industries of a number of Caribbean states. We often think of lobbyists as the archetypal "rent-seekers," but in this instance they have helped promote tourism. This study involves the use of panel regressions with data for thirteen destinations during the period 1991-2000. Its abstract follows:

There exist legal channels for informational lobbying of U.S. policymakers by foreign principals. Foreign governments and private sector principals frequently and intensively use this institutional channel to lobby on trade and tourism issues. The authors empirically study whether such lobbying effectively achieves its goal of trade promotion in the context of Caribbean tourism and it is the first paper to examine the potential for using foreign lobbying as a vehicle for development. They use panel data to explore and quantify the association between foreign lobbying by Caribbean principals and U.S. tourist arrivals to Caribbean destinations. A variety of sensitivity analyses support the finding of a strong association. The policy implications are obvious and potentially important for developing countries.

Here are the "money" bits of the conclusion as well. By all means, do read the entire paper if you are interested in it though:

The question of whether lobbying by foreigners can effectively promote their business interests is the broad issue with which this paper is concerned. The Foreign Agent Registration Act allows foreign principals to lobby inside the United States via U.S.-based agents. Lobbying can target U.S. policymakers directly, when U.S.-based agents directly contact them to provide information, or indirectly through contact with their aides. Most foreign lobbying appears to be informational, since foreigners are prohibited from contributing to election campaigns. The amounts expended by foreign principals are still substantial. Total foreign lobbying spending in the U.S. rivals political spending by domestic PACs.

This paper empirically explores the specific subject of tourism-related foreign lobbying by Caribbean principals. These principals include Caribbean governments and individuals in the private sector. We match U.S. tourist arrivals in Caribbean destinations annually between 1991-2000 with the total amount of lobbying spending by Caribbean principals. Estimates from fixed effects models and random effects gravity model indicate a strong positive association between foreign lobbying spending and the number of U.S. tourists. The relationship is quantitatively significant as well. A number of sensitivity analyses affirm this association. Further, lobbying appears to decrease the price elasticity of tourism demand, that is, destinations that lobby are able to differentiate their product. This finding suggests that foreign lobbying may be strategically used to increase tourism.

The answer to the question posed in the title of the paper is thus, in the affirmative. The implications for developing economies are obvious. There exists a legal channel for lobbying in the U.S. that might be used by governments and individuals alike to promote trade and tourism with the U.S. Rauch and Trindade (2002) emphasize the role that informational barriers play in restricting trade, and how networks overcome those barriers. Lobbying by foreign principals may also be viewed as a mechanism of overcoming informational barriers. While advertising may accomplish the same task, it is expensive to do. Further, advertising is far less credible on destination characteristics about which U.S. tourists really care—safety from diseases, security, protection against natural calamities—than an assenting nod from the U.S. government in the form of such information posted on the State Department website.