The Influence of Lobby Groups on Public Opinion: The Case of Environmental Policy

What role does the provision of information by special interest groups play in changing public perceptions about environmental issues, and on the formation of public policy? To date, much of the environmental policy literature has focussed on lobbying efforts by special interest groups in which direct policy contingent contributions are made to the government. However, spending by special interest groups, in particular those representing environmental concerns, is often not directed towards the government, but instead towards policies aimed at influencing the public’s beliefs regarding the extent and severity of environmental damage. This paper presents a model of strategic lobbying of the government and the public by special interest groups with opposing environmental concerns. Building on Yu (2005), we consider the case where a polluting firm and an environmental lobby send costly messages to a relatively uniformed public about environmental damage (indirect lobbying). At the same time, the firm can engage in direct lobbying of the government by making policy contingent contributions (direct lobbying). As such, the common agency framework of Grossman and Helpman (1994) is combined with the literature relating to signalling. The results reveal that separating equilibria exist where the public will learn the true level of environmental damage. The strategic importance of indirect lobbying as a means by which environmental concerns can curtail the political influence of polluters is also established. Finally, direct and indirect lobbying by the polluting firm are found to be strategic complements, but this is shown to occur only under limited circumstances. * This paper is adapted from a chapter in my PhD dissertation undertaken at the University of Adelaide. I would like to thank my supervisor, Richard Damania for his assistance and feedback. My appreciation also to Stephen King, John Whitley, and Zhihao Yu for comments on previous versions of this paper. The usual disclaimers apply. Email correspondence: [email protected]. © John Wilson, Centre for Regulation and Market Analysis, University of South Australia, 2005.