IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_6462.html
   My bibliography  Save this paper

Rent Seeking: The Social Cost of Contestable Benefits

Author

Listed:
  • Arye L. Hillman
  • Ngo Van Long

Abstract

A major contribution of the public-choice school is the recognition by Gordon Tullock that contestable rents give rise to social losses because of unproductive resource use. Contestable rents usually are politically assigned privileges. Contestable rents can also be found outside of government decisions. We describe the example of rents in academia in different cultures. The primary empirical question regarding rent seeking concerns the magnitude of the social loss from the contesting of rents. Direct measurement is impeded by lack of data and indeed denial that rent seeking took place. Contest models provide guidance regarding social losses. We provide a generalized contest model. Social losses from rent seeking are diminished in high-income democracies because rent seeking usually takes place by groups seeking ‘public good’ benefits. Rents are also less visible in democracies, because political accountability requires that rents be assigned in indirect non-transparent ways. These restraints are not present in autocracies, where rent seeking is also facilitated by corruption and by the need to influence a smaller number of decision makers. Ideology can influence whether rent seeking is recognized to exist.

Suggested Citation

  • Arye L. Hillman & Ngo Van Long, 2017. "Rent Seeking: The Social Cost of Contestable Benefits," CESifo Working Paper Series 6462, CESifo.
  • Handle: RePEc:ces:ceswps:_6462
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6462.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Iryna Topolyan, 2014. "Rent-seeking for a public good with additive contributions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(2), pages 465-476, February.
    2. Christian Ewerhart, 2015. "Mixed equilibria in Tullock contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(1), pages 59-71, September.
    3. Richard Cornes, 1993. "Dyke Maintenance and Other Stories: Some Neglected Types of Public Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 259-271.
    4. Hillman, Arye L. & Ursprung, Heinrich W., 2000. "Political culture and economic decline," European Journal of Political Economy, Elsevier, vol. 16(2), pages 189-213, June.
    5. Che, Yeon-Koo & Gale, Ian, 2000. "Difference-Form Contests and the Robustness of All-Pay Auctions," Games and Economic Behavior, Elsevier, vol. 30(1), pages 22-43, January.
    6. Wilfred J. Ethier & Arye L. Hillman (ed.), 2008. "The WTO and the Political Economy of Trade Policy," Books, Edward Elgar Publishing, number 3717.
    7. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 291-305.
    8. repec:elg:eechap:15325_19 is not listed on IDEAS
    9. Kahana, Nava & Klunover, Doron, 2016. "Complete rent dissipation when the number of rent seekers is uncertain," Economics Letters, Elsevier, vol. 141(C), pages 8-10.
    10. Van Long, Ngo, 2013. "The theory of contests: A unified model and review of the literature," European Journal of Political Economy, Elsevier, vol. 32(C), pages 161-181.
    11. Van Long, Ngo & Soubeyran, Antoine, 2000. "Existence and uniqueness of Cournot equilibrium: a contraction mapping approach," Economics Letters, Elsevier, vol. 67(3), pages 345-348, June.
    12. Konrad, Kai A, 2000. "Sabotage in Rent-Seeking Contests," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(1), pages 155-165, April.
    13. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    14. Kahana, Nava & Klunover, Doron, 2014. "Rent seeking and the excess burden of taxation," European Journal of Political Economy, Elsevier, vol. 35(C), pages 158-167.
    15. Park, Hyun & Philippopoulos, Apostolis & Vassilatos, Vanghelis, 2005. "Choosing the size of the public sector under rent seeking from state coffers," European Journal of Political Economy, Elsevier, vol. 21(4), pages 830-850, December.
    16. Hillman, Arye L, 1998. "Political Economy and Political Correctness," Public Choice, Springer, vol. 96(3-4), pages 219-239, September.
    17. Boosey, Luke & Brookins, Philip & Ryvkin, Dmitry, 2019. "Contests between groups of unknown size," Games and Economic Behavior, Elsevier, vol. 113(C), pages 756-769.
    18. Kolmar, Martin & Rommeswinkel, Hendrik, 2013. "Contests with group-specific public goods and complementarities in efforts," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 9-22.
    19. Kyung Baik, 2008. "Contests with group-specific public-good prizes," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(1), pages 103-117, January.
    20. Ellingsen, Tore, 1991. "Strategic Buyers and the Social Cost of Monopoly," American Economic Review, American Economic Association, vol. 81(3), pages 648-657, June.
    21. Toke S. Aidt, 2016. "Rent seeking and the economics of corruption," Constitutional Political Economy, Springer, vol. 27(2), pages 142-157, June.
    22. Fabella, Raul V., 1995. "The social cost of rent seeking under countervailing opposition to distortionary transfers," Journal of Public Economics, Elsevier, vol. 57(2), pages 235-247, June.
    23. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    24. Hillman, Arye L. & Katz, Eliakim, 1987. "Hierarchical structure and the social costs of bribes and transfers," Journal of Public Economics, Elsevier, vol. 34(2), pages 129-142, November.
    25. repec:elg:eechap:15325_21 is not listed on IDEAS
    26. Tullock, Gordon, 1971. "The Cost of Transfers," Kyklos, Wiley Blackwell, vol. 24(4), pages 629-643.
    27. Chowdhury, Subhasish M. & Lee, Dongryul & Sheremeta, Roman M., 2013. "Top guns may not fire: Best-shot group contests with group-specific public good prizes," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 94-103.
    28. Richard Cornes & Roger Hartley, 2005. "Asymmetric contests with general technologies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(4), pages 923-946, November.
    29. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, March.
    30. Hillman,Arye L., 2009. "Public Finance and Public Policy," Cambridge Books, Cambridge University Press, number 9780521494267, April.
    31. Becker, Gary S., 1985. "Public policies, pressure groups, and dead weight costs," Journal of Public Economics, Elsevier, vol. 28(3), pages 329-347, December.
    32. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    33. repec:elg:eechap:15325_13 is not listed on IDEAS
    34. Amegashie, J. Atsu, 2012. "Productive versus destructive efforts in contests," European Journal of Political Economy, Elsevier, vol. 28(4), pages 461-468.
    35. Baik, Kyung Hwan, 1993. "Effort levels in contests : The public-good prize case," Economics Letters, Elsevier, vol. 41(4), pages 363-367.
    36. Cédric Wasser, 2013. "Incomplete information in rent-seeking contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 239-268, May.
    37. Berentsen, Aleksander, 2002. "The economics of doping," European Journal of Political Economy, Elsevier, vol. 18(1), pages 109-127, March.
    38. Aidt, Toke S. & Hillman, Arye L., 2008. "Enduring rents," European Journal of Political Economy, Elsevier, vol. 24(3), pages 545-553, September.
    39. Baik, Kyung Hwan & Kim, In-Gyu & Na, Sunghyun, 2001. "Bidding for a group-specific public-good prize," Journal of Public Economics, Elsevier, vol. 82(3), pages 415-429, December.
    40. Roger D. Congleton & Arye L. Hillman (ed.), 2015. "Companion to the Political Economy of Rent Seeking," Books, Edward Elgar Publishing, number 15325.
    41. Hillman,Arye L., 2009. "Public Finance and Public Policy," Cambridge Books, Cambridge University Press, number 9780521738057, April.
    42. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-827, August.
    43. Nti, Kofi O., 2004. "Maximum efforts in contests with asymmetric valuations," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1059-1066, November.
    44. Cairns, Robert D. & Van Long, Ngo, 1991. "Rent seeking with uncertain opposition," European Economic Review, Elsevier, vol. 35(6), pages 1223-1235, August.
    45. repec:elg:eechap:15325_2 is not listed on IDEAS
    46. Paul Pecorino & Akram Temimi, 2008. "The Group Size Paradox Revisited," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 785-799, October.
    47. Jack Hirshleifer, 1983. "From weakest-link to best-shot: The voluntary provision of public goods," Public Choice, Springer, vol. 41(3), pages 371-386, January.
    48. Riaz, Khalid & Shogren, Jason F & Johnson, Stanley R, 1995. "A General Model of Rent Seeking for Public Goods," Public Choice, Springer, vol. 82(3-4), pages 243-259, March.
    49. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
    50. Heinrich W. Ursprung, 1990. "Public Goods, Rent Dissipation, And Candidate Competition," Economics and Politics, Wiley Blackwell, vol. 2(2), pages 115-132, July.
    51. Nava Kahana & Doron Klunover, 2015. "A note on Poisson contests," Public Choice, Springer, vol. 165(1), pages 97-102, October.
    52. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, Decembrie.
    53. Baik, Kyung Hwan & Kim, In-Gyu, 1997. "Delegation in contests," European Journal of Political Economy, Elsevier, vol. 13(2), pages 281-298, May.
    54. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-1187, December.
    55. Nti, Kofi O, 1999. "Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-430, March.
    56. Konrad, Kai A., 2004. "Bidding in hierarchies," European Economic Review, Elsevier, vol. 48(6), pages 1301-1308, December.
    57. Nannestad, Peter, 2007. "Immigration and welfare states: A survey of 15 years of research," European Journal of Political Economy, Elsevier, vol. 23(2), pages 512-532, June.
    58. Hillman, Arye L. & Van Long, Ngo & Soubeyran, Antoine, 2001. "Protection, lobbying, and market structure," Journal of International Economics, Elsevier, vol. 54(2), pages 383-409, August.
    59. Stefano Barbieri & David Malueg & Iryna Topolyan, 2014. "The best-shot all-pay (group) auction with complete information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(3), pages 603-640, November.
    60. Roger Myerson & Karl Wärneryd, 2006. "Population uncertainty in contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 469-474, January.
    61. Tullock, Gordon, 1997. "Where Is the Rectangle?," Public Choice, Springer, vol. 91(2), pages 149-159, April.
    62. Jeong-Yoo Kim & Insik Min & Christian Zimmermann, 2011. "The Economics of Citation," Korean Economic Review, Korean Economic Association, vol. 27, pages 93-114.
    63. Ignacio Del Rosal, 2011. "The Empirical Measurement Of Rent‐Seeking Costs," Journal of Economic Surveys, Wiley Blackwell, vol. 25(2), pages 298-325, April.
    64. Nannestad, Peter, 2004. "Immigration as a challenge to the Danish welfare state?," European Journal of Political Economy, Elsevier, vol. 20(3), pages 755-767, September.
    65. repec:elg:eechap:15325_15 is not listed on IDEAS
    66. Long, Ngo Van & Vousden, Neil J, 1987. "Risk-Averse Rent Seeking with Shared Rents," Economic Journal, Royal Economic Society, vol. 97(388), pages 971-985, December.
    67. repec:elg:eechap:15325_6 is not listed on IDEAS
    68. Katz, Eliakim & Nitzan, Shmuel & Rosenberg, Jacob, 1990. "Rent-Seeking for Pure Public Goods," Public Choice, Springer, vol. 65(1), pages 49-60, April.
    69. Gil S. Epstein & Yosef Mealem, 2009. "Group Specific Public Goods, Orchestration of Interest Groups and Free Riding," Working Papers 2009-02, Bar-Ilan University, Department of Economics.
    70. Esteban, Joan & Ray, Debraj, 2001. "Collective Action and the Group Size Paradox," American Political Science Review, Cambridge University Press, vol. 95(3), pages 663-672, September.
    71. Lim, Wooyoung & Matros, Alexander, 2009. "Contests with a stochastic number of players," Games and Economic Behavior, Elsevier, vol. 67(2), pages 584-597, November.
    72. repec:elg:eechap:15325_14 is not listed on IDEAS
    73. Congleton, Roger D., 1984. "Committees and rent-seeking effort," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 197-209, November.
    74. Hagen, Rune Jansen, 2014. "Rents and the Political Economy of Development Aid," Working Papers in Economics 07/14, University of Bergen, Department of Economics.
    75. Barbieri, Stefano & Malueg, David A., 2016. "Private-information group contests: Best-shot competition," Games and Economic Behavior, Elsevier, vol. 98(C), pages 219-234.
    76. Kahana, Nava & Klunover, Doron, 2014. "Rent Seeking and the Excess Burden of Taxation," IZA Discussion Papers 8160, Institute of Labor Economics (IZA).
    77. Gil Epstein & Yosef Mealem, 2009. "Group specific public goods, orchestration of interest groups with free riding," Public Choice, Springer, vol. 139(3), pages 357-369, June.
    78. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, vol. 18(1), pages 135-140, January.
    79. Elie Appelbaum & Eliakim Katz, 1986. "Transfer seeking and avoidance: On the full social costs of rent seeking," Public Choice, Springer, vol. 48(2), pages 175-181, January.
    80. N/A, 2013. "The UK economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 225(1), pages 3-3, August.
    81. repec:elg:eechap:15325_23 is not listed on IDEAS
    82. Gordon Tullock, 1971. "The Cost Of Transfers," Kyklos, Wiley Blackwell, vol. 24(4), pages 629-643, November.
    83. repec:elg:eechap:15325_12 is not listed on IDEAS
    84. Gil S. Epstein & Arye L. Hillman & Heinrich W. Ursprung, 1999. "The King Never Emigrates," Review of Development Economics, Wiley Blackwell, vol. 3(2), pages 107-121, June.
    85. repec:elg:eechap:15325_10 is not listed on IDEAS
    86. Hillman, Arye L & Ursprung, Heinrich W, 1988. "Domestic Politics, Foreign Interests, and International Trade Policy," American Economic Review, American Economic Association, vol. 78(4), pages 719-745, September.
    87. Nti, Kofi O., 1998. "Effort and performance in group contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 769-781, November.
    88. Lee, Dongryul, 2012. "Weakest-link contests with group-specific public good prizes," European Journal of Political Economy, Elsevier, vol. 28(2), pages 238-248.
    89. Arye L. Hillman, 2013. "Rent seeking," Chapters, in: William F. Shughart II & Laura Razzolini & Michael Reksulak (ed.), The Elgar Companion to Public Choice, Second Edition, chapter 19, pages 307-330, Edward Elgar Publishing.
    90. Katz, Eliakim & Tokatlidu, Julia, 1996. "Group competition for rents," European Journal of Political Economy, Elsevier, vol. 12(4), pages 599-607, December.
    91. Ian A. MacKenzie, 2017. "Rent creation and rent seeking in environmental policy," Public Choice, Springer, vol. 171(1), pages 145-166, April.
    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


    Cited by:

    1. Saibal KAR & Biswajit MANDAL & Sugata MARJIT & Vivekananda MUKHERJEE, 2020. "Seeking Rent In The Informal Sector," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(1), pages 151-164, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arye Hillman & Ngo Van Long, 2017. "The social cost of contestable benefits," CIRANO Working Papers 2017s-11, CIRANO.
    2. Arye L. Hillman & Heinrich W. Ursprung, 2016. "Where are the rent seekers?," Constitutional Political Economy, Springer, vol. 27(2), pages 124-141, June.
    3. Konrad, Kai A., 2007. "Strategy in contests: an introduction [Strategie in Turnieren – eine Einführung]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, WZB Berlin Social Science Center.
    4. Mercier, Jean-François, 2018. "Non-deterministic group contest with private information," Mathematical Social Sciences, Elsevier, vol. 95(C), pages 47-53.
    5. Baik, Kyung Hwan & Jung, Hanjoon Michael, 2021. "Contests with multiple alternative prizes: Public-good/bad prizes and externalities," Journal of Mathematical Economics, Elsevier, vol. 92(C), pages 103-116.
    6. Van Long, Ngo, 2013. "The theory of contests: A unified model and review of the literature," European Journal of Political Economy, Elsevier, vol. 32(C), pages 161-181.
    7. Boosey, Luke & Brookins, Philip & Ryvkin, Dmitry, 2019. "Contests between groups of unknown size," Games and Economic Behavior, Elsevier, vol. 113(C), pages 756-769.
    8. Dongryul Lee & Joon Song, 2019. "Optimal Team Contests to Induce More Efforts," Journal of Sports Economics, , vol. 20(3), pages 448-476, April.
    9. Arye L. Hillman & Heinrich W. Ursprung, 2016. "Academic exclusion: some experiences," Public Choice, Springer, vol. 167(1), pages 1-20, April.
    10. Brookins, Philip & Jindapon, Paan, 2021. "Risk preference heterogeneity in group contests," Journal of Mathematical Economics, Elsevier, vol. 95(C).
    11. Subhasish M. Chowdhury & Iryna Topolyan, 2015. "The Group All-Pay Auction with Heterogeneous Impact Functions," University of East Anglia Applied and Financial Economics Working Paper Series 069, School of Economics, University of East Anglia, Norwich, UK..
    12. Barbieri, Stefano & Malueg, David A., 2016. "Private-information group contests: Best-shot competition," Games and Economic Behavior, Elsevier, vol. 98(C), pages 219-234.
    13. Dongryul Lee & Pilwon Kim, 2022. "Group formation in a dominance-seeking contest," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 58(1), pages 39-68, January.
    14. Subhasish M. Chowdhury & Dongryul Lee & Iryna Topolyan, 2016. "The Max‐Min Group Contest: Weakest‐link (Group) All‐Pay Auction," Southern Economic Journal, John Wiley & Sons, vol. 83(1), pages 105-125, July.
    15. Send, Jonas, 2020. "Conflict between non-exclusive groups," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 858-874.
    16. Matthew D. Mitchell, 2019. "Uncontestable favoritism," Public Choice, Springer, vol. 181(1), pages 167-190, October.
    17. Subhasish M. Chowdhury & Dongryul Lee & Iryna Topolyan, 2013. "The Max-Min Group Contest," University of East Anglia Applied and Financial Economics Working Paper Series 050, School of Economics, University of East Anglia, Norwich, UK..
    18. Stefano Barbieri & David Malueg & Iryna Topolyan, 2014. "The best-shot all-pay (group) auction with complete information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(3), pages 603-640, November.
    19. Eliaz, Kfir & Wu, Qinggong, 2018. "A simple model of competition between teams," Journal of Economic Theory, Elsevier, vol. 176(C), pages 372-392.
    20. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.

    More about this item

    Keywords

    rent seeking; contests; political discretion; academic merit; ideology; political correctness;
    All these keywords.

    JEL classification:

    • H00 - Public Economics - - General - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_6462. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.