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The social cost of rent seeking in Europe

Author Info

  • Angelopoulos, Konstantinos
  • Philippopoulos, Apostolis
  • Vassilatos, Vanghelis

Abstract

Direct measurement of the social cost of rent seeking is impeded by non-observable and non-reported activities. We use a dynamic stochastic general equilibrium model to compute the social cost of rent seeking in Europe. Our estimate is based on competition among interest groups for privileges provided by governments, including income transfers, subsidies, and preferential tax treatment. The model, which is calibrated to the euro area as a whole and also to individual euro member countries for 1980-2003, performs well vis-à-vis the data. We find that significant proportions of GDP are extracted as rents available to be sought by rent seekers.

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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 25 (2009)
Issue (Month): 3 (September)
Pages: 280-299

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Handle: RePEc:eee:poleco:v:25:y:2009:i:3:p:280-299
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

Keywords: Rent seeking Rent extraction Privilege Taxation Public spending;

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