Firm Size, Economic Situation and Influence Activities
AbstractThis paper discusses the optimal firm size in the presence of influence activities, and the level of individual rent-seeking dependent on the economic situation of the firm. Since firm size has a discouraging effect on the level of individual rent-seeking but also a quantity effect as the number of rent-seekers increases, the interplay of both effects determines whether the employer chooses an inefficiently small or large firm size. In the given setting, a bad economic situation leads to both a higher probability of a substantial loss and a reduction of productivity. The productivity effect and the two other effects together determine the optimal level of individual rent-seeking.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2391.
Length: 27 pages
Date of creation: Oct 2006
Date of revision:
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Other versions of this item:
- Matthias Kräkel, 2006. "Firm Size, Economic Situation and Influence Activities," Bonn Econ Discussion Papers bgse16_2006, University of Bonn, Germany.
- Kräkel, Matthias, 2006. "Firm Size, Economic Situation and Influence Activities," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 167, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- D2 - Microeconomics - - Production and Organizations
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-25 (All new papers)
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