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Rent Seeking

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  • Shankha Chakraborty
  • Era Dabla-Norris

Abstract

This paper examines the relationship between rent seeking and economic performance when governments cannot enforce property rights. With imperfect credit markets and a fixed cost of rent seeking, only wealthy agents choose to engage in it, since it enables them to protect their wealth from expropriation. Hence, the level of rent seeking and economic performance are determined by the initial distribution of income and wealth. When individuals also differ in their productivity, not all wealthy agents become rent seekers and the social costs of rent seeking are typically lower. In both cases, multiple equilibria with different levels of rent seeking and production are possible.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/43.

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Length: 28
Date of creation: 01 Mar 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/43

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Keywords: Income distribution; Economic models; probability; expropriation; equation; credit markets; increasing returns; fixed costs; optimization; equations; cumulative distribution function; distribution of income; institutional development; general equilibrium model; correlation; expected returns;

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Cited by:
  1. Iqbal, Nasir & Daly, Vince, 2014. "Rent seeking opportunities and economic growth in transitional economies," Economic Modelling, Elsevier, Elsevier, vol. 37(C), pages 16-22.

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