Trade associations, business associations, professional clubs, trade unions, chambers of commerce, academic societies, industry trade groups, standard setting organizations, and medieval guilds are all shapes of the same generic organizational form, called an association. Given the broad list of exemplary organizations, it may not be surprising that the existence of associations could be documented all over the world throughout the last 1000 years. Researchers from different backgrounds are highly divided, however, whether the existence of such private organizations, which are designed to promote the common interests of their members (and not the interests of non-members), are positive or negative for the economy and overall welfare in net terms.
In “Business Associations, Welfare, and Endogenous Institutions,” Maria Larrain and Jens Prüfer construct a model to study precisely this question. They provide a testable answer, which is supported by existing evidence, and identify characteristics under which (and why and for whom) the net welfare effects of associations may be positive or negative.
Jens Prüfer 