Author
Listed:
- Giuseppe Dari-Mattiacci
(Faculty of Economics and Business & Tinbergen Institute - UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam, George Mason University [Fairfax])
- Eric Langlais
(BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)
- Bruno Lovat
(BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)
- Francesco Parisi
(University of Minnesota [MN, USA])
Abstract
This paper presents a general rent-seeking model in which participants decide on entry before choosing their levels of efforts. The conventional wisdom in the rent-seeking literature suggests that the rent dissipation increases with the number of potential participants and with their productivity of effort. In this paper, we show that this result of the rent-seeking literature is far from general and applies only when participants are relatively weak and enter the game with certainty. In the presence of strong competitors, the expected total dissipation actually decreases, since participation in the game is less frequent. We further consider the impact of competitors' exit option, distinguishing between "redistributive rent-seeking" and "productive rent-seeking" situations. In redistributive rent-seeking, no social loss results from the fact that all competitors exit the race. In productive rent-seeking, instead, lack of participation creates a social loss (the "lost treasure" effect), since valuable rents are left unexploited. We show that the lost-treasure effect perfectly counterbalances the reduction in rent dissipation due to competitors' exit. Hence, unlike redistributive rent-seeking, in productive rent-seeking the total social loss remains equal to the entire rent even when parties grow stronger or the number of players increases.
Suggested Citation
Giuseppe Dari-Mattiacci & Eric Langlais & Bruno Lovat & Francesco Parisi, 2005.
"Crowding-out in Productive and Redistributive Rent-Seeking,"
Post-Print
hal-00279253, HAL.
Handle:
RePEc:hal:journl:hal-00279253
DOI: 10.1007/s11127-007-9186-5
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