It Takes Two to Tango: Lobbies and the Political Business Cycle

SUMMARY Merging the impacts of interest groups on economic growth with governments' interest in unemployment and inflation, there should be a link between political business cycles and interest group formation. Interpreting Olson's Law in a short‐run perspective and integrating it with political business cycles, this contribution examines the link. We illustrate how such a model could look like, before investigating the relationship of lobbies, governments and voters empirically. As the time‐series‐analysis based on the German lobby‐list shows, lobbies strategically organize their activity to foster reelection of the governments: It takes two to tango.