An Analysis of the Effect of Interest Groups’ Rent-seeking Activities on Market Openness

This paper empirically investigates the effect of interest groups’ rent-seeking activities on market openness from a political economy perspective. Using panel data from 37 OECD countries over the period 2010 to 2023, the degree of market openness is measured by trade freedom, investment freedom, and financial freedom. The main explanatory variables include the Corruption Perception Index and the Control of Corruption indicator, while control variables consist of the logarithm and squared terms of GDP per capita and the Democracy Index. The empirical results show that lower levels of corruption are significantly associated with higher levels of trade, investment, and financial market openness. This suggests that rent-seeking activities by interest groups may undermine policy transparency and hinder liberalization. In particular, a nonlinear U-shaped relationship is observed between economic scale and market openness, indicating that more advanced economies tend to adopt more open trade policies. Moreover, while the level of democracy positively influences trade and financial openness, it shows a negative association with investment freedom.