Privatization, Free Riding, and Industry-Expanding Lobbying
Critics of privatization argue that privatization encourages providers to lobby for industry expansion. I argue that this is not generally true when public-sector actors also lobby.
Where the effectiveness of advocacy depends on total expenditures, some initial amount of privatization always decreases industry-expanding advocacy. The extent of privatization for which this no longer holds depends on the total benefits of provision to the public and private-sector actors, as well as the extent of collusion.
Under relaxed assumptions, the effect of privatization on industry-expanding advocacy is ambiguous. The charge that privatization will increase advocacy is unfounded without further empirical development.
Alexander Volokh, Privatization, Free Riding, and Industry-Expanding Lobbying, 30 Int'l Rev. L. & Econ. 62 (2010).