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Rent-seeking competition from state coffers in Greece: a calibrated DSGE model

Author

Listed:
  • Konstantinos Angelopoulos

    (University of Glasgow)

  • Sophia Dimeli

    (Athens University of Economics and Business)

  • Apostolis Philippopoulos

    (Athens University of Economics and Business, University of Glasgow and Visiting Scholar at the Bank of Greece)

  • Vanghelis Vassilatos

    (Athens University of Economics and Business)

Abstract

We incorporate an uncoordinated redistributive struggle for extra fiscal privileges and favors into an otherwise standard dynamic stochastic general equilibrium model. Our aim is to quantify the extent of rent seeking and its macroeconomic implications. The model is calibrated to Greek quarterly data over 1961:1-2005:4. Our work is motivated by the rich and distorting tax-spending system in Greece, as well as the common belief that interest groups compete with each other for fiscal privileges at the expense of the general public interest. We find that (i) the introduction of rent seeking moves the model in the right direction vis-à-vis the data (ii) an important fraction of GDP is extracted by rent seekers (iii) there can be substantial welfare gains from reducing rent seeking activities.

Suggested Citation

  • Konstantinos Angelopoulos & Sophia Dimeli & Apostolis Philippopoulos & Vanghelis Vassilatos, 2010. "Rent-seeking competition from state coffers in Greece: a calibrated DSGE model," Working Papers 120, Bank of Greece.
    • Handle: RePEc:bog:wpaper:120
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    Citations

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    Cited by:

    1. Charles A.E. Goodhart & M. Udara Peiris & Dimitrios P. Tsomocos, 2019. "Debt, recovery rates and the Greek dilemma," Chapters, in: Financial Regulation and Stability, chapter 13, pages 313-326, Edward Elgar Publishing.
    2. Aristidis Bitzenis & Vasileios Vlachos & Friedrich Schneider, 2016. "An Exploration of the Greek Shadow Economy: Can Its Transfer into the Official Economy Provide Economic Relief Amid the Crisis?," Journal of Economic Issues, Taylor & Francis Journals, vol. 50(1), pages 165-196, January.
    3. Costa Junior, Celso J. & Garcia-Cintado, Alejandro C., 2021. "Rent-seeking in an emerging market: A DSGE approach," Economic Systems, Elsevier, vol. 45(2).
    4. Giorgio d'Agostino & Francesco Giuli & Marco Lorusso & Margherita Scarlato, 2020. "Fiscal policy, labour market, and inequality: Diagnosing South Africa's anomalies in the shadow of racial discrimination," WIDER Working Paper Series wp-2020-122, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Fiscal policy; rent seeking; welfare;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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