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The Effect of Rent Seeking on Economics Growth

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Abstract

This paper develops a model of political support which it links to economic growth. Governments gain support by creating wealth and also by creating rent, which gives rise to rent seeking, a major cause of inequality and poor economic performance, as well as a link between the economic and political systems. A low rent-seeking option maximizes support only if “inclusiveness,” as defined and measured here, is high. With low inclusiveness, state efforts to promote growth also promote rent seeking, and the latter effects are longer lasting—rent seeking crowds out innovation and new product R&D. Depending on comparative political advantage, the quest for political support can become the road to an inclusive polity, a kind of political invisible hand, or the road to serfdom.

Suggested Citation

  • Richard L. Carson, 2009. "The Effect of Rent Seeking on Economics Growth," Carleton Economic Papers 09-10, Carleton University, Department of Economics, revised 19 Dec 2016.
    • Handle: RePEc:car:carecp:09-10
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