ON THE FORM OF TRANSFERS TO SPECIAL INTERESTS

An important question in political economy concerns the form of transf ers to special interests. The Chicago view is that political competiti on leads politicians to make such transfers efficiently. The Virginia position is that lack of information on the part of voters leads polit icians to favor inefficient ''sneaky'' methods of redistribution. This paper analyzes the form of transfers in a model of political competit ion in which politicians have incentives to make transfers to special interests. It shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians, ine fficient methods of redistribution may be employed.