Got much, got nothing: analyzing the impact of increased special interest groups’ influence on utility

This study investigates the economic dynamics associated with interest groups receiving allowances and influencing public policy, particularly focusing on the ultra-Orthodox community in Israel. The research aims to model the socio-economic implications of increasing transfer payments to interest group members who abstain from labor market participation. Using an innovative differential equation model, the study evaluates the long-term impact on utility for both the broader working population and interest group members. Key findings indicate that while increased allowances enhance private consumption for interest group members, they paradoxically reduce the overall provision of public goods due to a decline in working contributors. This depletion negatively impacts utility and eventually diminishes benefits for the interest group members. The model underscores a tipping point where, beyond a critical level of allowance, public good provision and utility are compromised. The study combines theoretical analysis with sensitivity tests to assess the effects of allowance levels, tax burden, utility, and population growth rates. Results demonstrate that sustained increases in allowances can accelerate the transition of working individuals to non-working status, ultimately destabilizing both public good provision and the utility balance across populations.