Firms specialized in two different sectors lobby to induce the government to subsidize the type of education complementary to their production. Lobbying is endogenous. We show that, if lobbying is not costly, both sectors will lobby in equilibrium and the education policy will induce the same skill composition that would be chosen by the social planner. However, if lobbying is costly and there is sufficient asymmetry between the sectors, only one sector will exert pressure on the policymaker in the attempt to direct resources toward the type of education required by its production. Which sector will engage in lobbying depends on relative size, productivity and price.
Lobbying for education in a two-sector model
PROFETA, PAOLA ANTONIA
2010
Abstract
Firms specialized in two different sectors lobby to induce the government to subsidize the type of education complementary to their production. Lobbying is endogenous. We show that, if lobbying is not costly, both sectors will lobby in equilibrium and the education policy will induce the same skill composition that would be chosen by the social planner. However, if lobbying is costly and there is sufficient asymmetry between the sectors, only one sector will exert pressure on the policymaker in the attempt to direct resources toward the type of education required by its production. Which sector will engage in lobbying depends on relative size, productivity and price.
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