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Inequality, Lobbying, and Resource Allocation

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Author Info
Joan Esteban
Debraj Ray

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Abstract

This paper describes how wealth inequality may distort public resource allocation. A government seeks to allocate limited resources to productive sectors, but sectoral productivity is privately known by agents with vested interests in those sectors. They lobby the government for preferential treatment. The government--even if it honestly seeks to maximize economic efficiency--may be confounded by the possibility that both high wealth and true economic desirability create loud lobbies. Broadly speaking, both poorer economies and unequal economies display greater public misallocation. The paper warns against the conventional wisdom that this is so because such governments are more "corrupt."

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 1 (March)
Pages: 257-279
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Handle: RePEc:aea:aecrev:v:96:y:2006:i:1:p:257-279

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Cotton, Christopher, 2007. "Informational Lobbying and Competition for Access," MPRA Paper 1842, University Library of Munich, Germany. [Downloadable!]
  2. Ashish Chaturvedi & Amihai Glazer, 2005. "Competitive Proposals of Policies by Lobbies," Working Papers 050614, University of California-Irvine, Department of Economics. [Downloadable!]
  3. Che, Yeon-Koo & Gale, Ian, 2006. "Market versus Non-Market Assignment of Initial Ownership," MPRA Paper 6095, University Library of Munich, Germany, revised 30 May 2006. [Downloadable!]
  4. Jean-Yves Duclos, 2006. "Equity and Equality," IZA Discussion Papers 2284, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Allcott, Hunt & Lederman, Daniel & Lopez, Ramon, 2006. "Political institutions, inequality, and agricultural growth : the public expenditure connection," Policy Research Working Paper Series 3902, The World Bank. [Downloadable!]
  6. Yeon-Koo Che & Ian Gale, 2006. "Market Versus Non-Market Assignment of Initial Ownership," Discussion Papers 0607-05, Columbia University, Department of Economics. [Downloadable!]
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