In this paper we ask whether more decentralized political structures such as federalism are affected less severely by the ills of interest group politics recently emphasized by Becker (1983) and Olson (1982). We examine this question in a model where the government exchanges tax policies and entry restrictions for political resources. The analysis emphasizes how this exchange is influenced by heterogeneity within interest groups. It is shown that decentralization does not necessarily attenuate the welfare effects of interest group politics.

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Journal European Journal of Political Economy
Hettich, W. (Walter), & Winer, S. (1987). Federalism, special interests and the exchange of policies for political resources. European Journal of Political Economy, 3(1-2), 33–54. doi:10.1016/S0176-2680(87)80004-6