Advanced Search
MyIDEAS: Login to save this article or follow this journal

Inequality, Lobbying, and Resource Allocation

Contents:

Author Info

  • Joan Esteban
  • Debraj Ray

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."

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282806776157533
Download Restriction: no

File URL: http://www.aeaweb.org/aer/data/mar06_app_20040037.pdf
Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

Bibliographic Info

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

Volume (Year): 96 (2006)
Issue (Month): 1 (March)
Pages: 257-279

as in new window
Handle: RePEc:aea:aecrev:v:96:y:2006:i:1:p:257-279

Note: DOI: 10.1257/000282806776157533
Contact details of provider:
Email:
Web page: https://www.aeaweb.org/aer/
More information through EDIRC

Order Information:
Web: https://www.aeaweb.org/subscribe.html

Related research

Keywords:

References

References listed on IDEAS
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.:
as in new window
  1. Kiminori Matsuyama, 2002. "The Rise of Mass Consumption Societies," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(5), pages 1035-1070, October.
  2. Chang, Roberto, 1998. "Political party negotiations, income distribution, and endogenous growth," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(2), pages 227-255, April.
  3. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(3), pages 681-712, August.
  4. Esteban, Joan & Ray, Debraj, 2000. "Wealth constraints, lobbying and the efficiency of public allocation," European Economic Review, Elsevier, vol. 44(4-6), pages 694-705, May.
  5. Hongyi Li & Lixin Colin Xu & Heng-fu Zou, 2000. "Corruption, Income Distribution, and Growth," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 472, China Economics and Management Academy, Central University of Finance and Economics.
  6. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, Springer, vol. 1(2), pages 189-211, June.
  7. Dasgupta, Partha & Ray, Debraj, 1987. "Inequality as a Determinant of Malnutrition and Unemployment: Policy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 97(385), pages 177-88, March.
  8. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-70, August.
  9. Ghosh, Parikshit & Ray, Debraj, 1996. "Cooperation in Community Interaction without Information Flows," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(3), pages 491-519, July.
  10. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 565, C.E.P.R. Discussion Papers.
  11. Bénabou, Roland, 1996. "Inequality and Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1450, C.E.P.R. Discussion Papers.
  12. Francisco Rodríguez, 2004. "Inequality, Redistribution, And Rent-Seeking," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 16, pages 287-320, November.
  13. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  14. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  15. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(2), pages 151-72, April.
  17. Raquel Fernandez & Jordi Gali, 1997. "To Each According To...? Markets, Tournaments, and the Matching Problem with Borrowing Constraints," NBER Working Papers 5930, National Bureau of Economic Research, Inc.
  18. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 600-621, June.
  19. Ray, Debraj & Streufert, Peter A, 1993. "Dynamic Equilibria with Unemployment Due to Undernourishment," Economic Theory, Springer, Springer, vol. 3(1), pages 61-85, January.
  20. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
  21. Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1289-1332, November.
  22. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  23. Saint Paul, Gilles & Verdier, Thierry, 1997. " Power, Distributive Conflicts, and Multiple Growth Paths," Journal of Economic Growth, Springer, Springer, vol. 2(2), pages 155-68, July.
  24. Piketty, Thomas, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(2), pages 173-89, April.
  25. Bental, Benjamin & Peled, Dan, 1996. "The Accumulation of Wealth and the Cyclical Generation of New Technologies: A Search Theoretic Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 687-718, August.
  26. Austen-Smith, David & Banks, Jeffrey S., 2002. "Costly signaling and cheap talk in models of political influence," European Journal of Political Economy, Elsevier, vol. 18(2), pages 263-280, June.
  27. Morten Bennedsen & Sven E. Feldmann, 2002. "Lobbying Legislatures," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(4), pages 919-948, August.
  28. Kelly Bedard, . "Human Capital Versus Signaling Models: University Access and High School Drop-outs," Canadian International Labour Network Working Papers 19, McMaster University.
  29. Randall K. Morck & David A. Stangeland & Bernard Yeung, 1998. "Inherited Wealth, Corporate Control and Economic Growth: The Canadian Disease," NBER Working Papers 6814, National Bureau of Economic Research, Inc.
  30. Lee, Woojin & Roemer, John E, 1998. " Income Distribution, Redistributive Politics, and Economic Growth," Journal of Economic Growth, Springer, Springer, vol. 3(3), pages 217-40, September.
  31. Rasmusen, Eric, 1993. " Lobbying When the Decisionmaker Can Acquire Independent Information," Public Choice, Springer, Springer, vol. 77(4), pages 899-913, December.
  32. Esteban, Joan & Ray, Debraj, 1999. "Conflict and Distribution," Journal of Economic Theory, Elsevier, vol. 87(2), pages 379-415, August.
  33. Svensson, Jakob, 1998. "Investment, property rights and political instability: Theory and evidence," European Economic Review, Elsevier, vol. 42(7), pages 1317-1341, July.
  34. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
  35. Verdier, Thierry, 1996. "The Rise and Fall of Elites: A Theory of Economic Development and Social Polarization in Rent-seeking Societies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1495, C.E.P.R. Discussion Papers.
  36. Ogus, Anthony & Zhang, Qing, 2005. "Licensing Regimes east and West," International Review of Law and Economics, Elsevier, Elsevier, vol. 25(1), pages 124-142, March.
  37. Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April.
  38. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(6), pages 1208-31, December.
  39. Lohmann, Susanne, 1994. "Information Aggregation through Costly Political Action," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 518-30, June.
  40. Benhabib, Jess & Rustichini, Aldo, 1996. " Social Conflict and Growth," Journal of Economic Growth, Springer, Springer, vol. 1(1), pages 125-42, March.
  41. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 96-129, March.
  42. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 843-67, June.
  43. Martín Rama & Guido Tabellini, . "Lobbying by Capital and Labor over Trade and Labor Market Policies," Working Papers 94, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  44. Che, Yeon-Koo & Gale, Ian, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(1), pages 1-21, January.
  45. Mohtadi, Hamid & Roe, Terry, 1998. "Growth, lobbying and public goods," European Journal of Political Economy, Elsevier, vol. 14(3), pages 453-473, August.
  46. Mani, Anandi, 2001. " Income Distribution and the Demand Constraint," Journal of Economic Growth, Springer, Springer, vol. 6(2), pages 107-33, June.
  47. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, Econometric Society, vol. 65(6), pages 1389-1420, November.
  48. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, Springer, vol. 1(2), pages 149-87, June.
  49. Austen-Smith, David, 1994. "Strategic Transmission of Costly Information," Econometrica, Econometric Society, Econometric Society, vol. 62(4), pages 955-63, July.
  50. Perotti, Roberto, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(4), pages 755-76, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. 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.
  2. Shun-ichiro Bessho & Kimiko Terai, 2008. "Competition for Private Capital and Central Grants: The Case of Japanese Industrial Parks," Working Papers 080909, University of California-Irvine, Department of Economics.
  3. Zhang, Lei, 2008. "Political economy of income distribution dynamics," Journal of Development Economics, Elsevier, vol. 87(1), pages 119-139, August.
  4. Islam, Asif & López, Ramón, 2011. "Fiscal spending for economic growth in the presence of imperfect markets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8709, C.E.P.R. Discussion Papers.
  5. Sanghamitra Bandyopadhyay & Joan Esteban, 2007. "Redistributive Taxation and PublicExpenditures," STICERD - Distributional Analysis Research Programme Papers, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 95, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. Campante, Felipe R. & Ferreira, Francisco G.H., 2004. "Inefficient lobbying, populism and oligarchy," Policy Research Working Paper Series 3240, The World Bank.
  7. Kaufmann, Daniel & Vicente, Pedro C., 2005. "Legal Corruption," MPRA Paper 8186, University Library of Munich, Germany.
  8. 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.
  9. Joan Esteban & Facundo Albornoz & Paolo Vanin, 2009. "Government Information Transparency," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 774.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 10 Feb 2010.
  10. Cubel, Maria, 2012. "Fiscal Equalization and Political Conflict," NEPS Working Papers, Network of European Peace Scientists 9/2012, Network of European Peace Scientists.
  11. Cotton, Christopher, 2007. "Informational Lobbying and Competition for Access," MPRA Paper 1842, University Library of Munich, Germany.
  12. Duclos, Jean-Yves, 2006. "Equity and Equality," IZA Discussion Papers 2284, Institute for the Study of Labor (IZA).
  13. Theo Eicher & Cecilia García-Peñalosa & Tanguy van Ypersele, 2009. "Education, Corruption and Constitutional Reform," Working Papers, University of Washington, Department of Economics UWEC-2007-17-P, University of Washington, Department of Economics.
  14. Ashish Chaturvedi & Amihai Glazer, 2005. "Competitive Proposals of Policies by Lobbies," Working Papers 050614, University of California-Irvine, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:96:y:2006:i:1:p:257-279. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.