The political market for government assistance to australian manufacturing industries

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 made to see how well these factors can explain (1) the differences between rates of assistance to Australia’s manufacturing industries at various points in time between 1968-69 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.