The Political Market for Government Assistance to Australian Manufacturing Industries*
*Department of Economics, Research School of Pacific Studies. Australian National University. This is a revised version of a paper presented to the Seventh Conference of Economists, Macquarie University, August 1978. I am grateful for helprul comments from conference participants as well as from Jonathon pincus, Peter Lloyd, Geoff Edwards and other participants at Monash and ANU seminars. The computational assistance of Alison Davis and Anne Sibly and the assistance with data provided by the IAC are also gratefully acknowledged.
Abstract
This paper applies the emerging neoclassical economic theory of politics to the question of why some industries receive more government assistance than others. Various determinants of the incentives for interest groups to demand assistance and for governments to supply assistance are suggested on a priori grounds. An attempt is then mode to see how well these factors can explain (I) the differences between rates of assistance to Australia's munufacturing industries at various points in time between 1968–49 and 1977–78. and (2) the different changes in those rates during the mid-1970s. The evidence generally supports the theory, and prompts some suggestions as to how to reduce existing government distortions.
