How government preferences and interest group interaction can affect policy choice in the Brazilian forestry sector

Bauch, S. (2005). How government preferences and interest group interaction can affect policy choice in the Brazilian forestry sector. Série Técnica IPEF, 35, 1. Piracicaba: Instituto de Pesquisas e Estudos Florestais – IPEF.

Abstract

The choice of policies to be implemented is a problem faced by the governments that has several influencing factors. In the environmental regulation literature, several models try to explain government behavior, single interest group behavior, interaction among interest groups, and efficiency result relating to welfare, losers and winners, and tax deadweight loss. In our paper we argue that government preferences in relation to the source and use of revenue determine the decision of which public policies are implemented. Consequently, interest groups that support the policy of choice are favored and others are not. Setting this as background, we construct a game theoretical model with three players: government, and two interest groups. We argue that the objective of all players is to maximize their individual profit, and apply the results of this maximization to verify possible behavior by interest groups. We assume that the interest groups earn a percentage of the government’s profits according to their support of the chosen policy portfolio. Sequentially, we apply this model to analyze the interaction of interest groups in determining policy choice in the Brazilian forestry sector, in specific, the approval of the forest concession legislation. We verify in the case of conflicting interests, interest groups do not cooperate, a result that mimics reality. Finally, we argue that this non-cooperation leads to efficiency, since it allows the dissemination of information to all players.