FACTORS AFFECTING THE FORMATION OF INTEREST

GROUPS

Aileen G. SampsonClemson UniversityClemson, SC

Introduction

Clemson, SC example In 2000, Wal-mart proposed Supercenter

construction in Clemson on Issaqueena Trail. Citizens for Responsible Growth in Clemson

opposed Wal-mart. Wal-mart waged extended, expensive legal

battle. 2006, no Wal-mart store in Clemson. In 2002, Wal-mart built a Supercenter in

neighboring Central. Wal-mart faced no citizen opposition to their locating in Central.

Introduction

Examples of Promotional Interest Groups Citizens for Responsible Growth in

Clemson The National Rifle Association The American Association of Retired

Persons The Waterville Women’s Association

Introduction

What is a promotional interest group? An entity filing under Internal Revenue

Code (IRC) section 501 (c) (4) Civic Leagues and Social Welfare

Organizations Not charities Contributions, generally, not tax

deductible Purpose: advocate policy positions

Introduction

Why study the formation patterns of these groups? Economic impact

In 1999, 21,082 promotional interest groups reported $41.6 billion in revenue and held $59.5 billion in assets

Influence economic policy nationally and locally

Influence industrial and business patterns Can oppose businesses Can support businesses

Introduction

The objective of this study is to identify community characteristics that encourage or discourage the formation (mobilization) of groups like Citizens for Responsible Growth in Clemson.

At issue is the opportunity cost of acquiring influence.

Related studies have not considered as many community factors or as many communities as this study considers.

Literature Review

Interest Group Theory of Government

Political operatives are self-interested economic agents whose behavior can be explained using general economic principles.

Literature Review

Political Scientists Bentley(1908; 1967) and Truman (1951) speak to significance of interest groups in shaping political landscape.

Economists have enhanced and refined the observations of Bentley and Truman.

Literature Review

Olson (1965) questions why individuals join large pressure groups.

Olson concludes lobbying activity is a by-product of private goods provision (a purpose other than lobbying).

Literature Review

Stigler (1971) examines regulatory activity as a market phenomenon.

Demanders: special interest groups Suppliers: those bearing costs of

regulation Legislative bodies: brokers facilitating

wealth transfers

Literature Review

Peltzman (1976) builds on Stigler’s work. Provides quantitative, general model of

legislative decision-making process Models legislator as a vote (majority)

maximizer subject to wealth constraints

Literature Review

Becker (1983) explores competition among interest groups for influence.

Concludes wealth transfers are smaller when there is competition among interest groups for influence

Literature Review

Two papers provided the theoretical citations used to determine the list of factors to include in the empirical work.

Literature Review

Gronbjerg and Paarlberg (2001) use Internal Revenue Service (IRS) data on advocacy nonprofits in Indiana counties to examine variations in the density of nonprofit organizations.

Literature Review

Murrell (1984) studies “sectional” groups. The groups in his study are trade associations. He uses international data from the Organization for Economic Cooperation and Development (OECD) to test 11 hypotheses about interest group formation.

Approach

Each cited theory suggests one or more factors as possible determinants of interest group formation.

13 hypotheses were formulated and tested based on the theories cited in Murrell (1984) and Gronbjerg and Paarlberg (2001).

Empirical Method Summary

Dependent variable: Number of interest groups per capita (density)

Model: y=a+βX1+ βX2+βX3+ …+ε Population density is raised to -.25. All other variables untransformed. 30 continuous variables 4 regional indicator variables 8 population size categories Estimation Method: OLS

Data Summary

Circa 2000 County-Level Government and Private Sources

IRS Business Master Files Census Bureau Bureau of Labor Statistics Glenmary Research Center

Theory Classes

Structural Theories Government Theories Voting Theories Socioeconomic Theories Community “Needs” Theories

Support for Structural Theories

Structural Measures

Description Theory Predicts elasticity p>|t|

County Age + Charities Per Capita + Churches Per Capita + Labor Force Part. Rate + Percent Adherents + 0.24 0.01 Population Density - -0.08 0.00 Prod. Workers Per Capita + Religious Herfindahl - , + -0.21 0.00 State Capital County + 0.09 0.05 Population 50K-99.9K - Population 100K-249.9K - Population 250K-499.9K - Population 500K-749.9K - Population 750K-999.9K - Population 1000K-1499.9K - Population > 1500K -

Support for Government Theories

Description Theory Predicts

Elasticity P>|t|

Expenditure per capita + 0.09 0.00

Cities, Towns, Special Districts, School Districts + 0.06 0.00

Degree of Decentralization +

Government Measures

Support for Socioeconomic TheoriesSocioeconomic Measures

Description Theory Predicts

Elasticity p>|t|

High-status human capital measures

Percent with bachelor’s degree +

Dentist per capita +

Doctors per capita +

Attorneys per capita +

Middle-to-lower class human capital measures

Farms per capita, proxy for farmers - 0.13 0.00

Production workers per capita -

Other socioeconomic measures

Infant mortality rate -

Income per capita +

Percent above the poverty level + 1.17 0.00

Percent earnings from farming - -0.03 0.04

Support for Voting Theories

Voting Measures

Description Theory Predicts

Elasticity p>|t|

Voter Participation Rate + -0.26 0.04

Percent Voting for Third Party Candidates +

There is no support found for the voting theory(ies).

Support for Community “Needs” Theories

There is no support found for the community “needs” theory(ies).

Description Theory Predicts elasticity p>|t|

Percent Population Under 18 years old + Percent Above Poverty - 1.17 0.00 Crime Rate +

Community “Needs” Measures

ImplicationsTo minimize likelihood of resistance:

Locate in the Southern region in an urban center removed from the state capital.

Locate in a community featuring a small middle class, small over-65 segment, fewer charities, and higher voter participation rates on average.

Locate where there are many different religious denominations, but only one or two dominant religions. The percentage of the population adhering to religion should be relatively low.

The END