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Political incentives for rent creation

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  • Randall G. Holcombe

    (Florida State University)

Abstract

Rent-seeking is often depicted as a contest in which rent-seekers compete for a prize—the rent. In the process of rent-seeking, much or perhaps all of the rent is dissipated through the costs the contestants incur to compete. Rent dissipation is inconsistent with the incentives of both the rent-seekers and those who create the rents. Policymakers have an incentive to create rents only if they gain from the process, and their gain comes from sharing any surplus that goes to those who obtain the rents. A surplus can be created through a barrier to entry into rent-seeking. When institutions that generate barriers to entry into rent-seeking break down, rent-seeking competitions can occur in which all rents are dissipated, but this should be a special case rather than the general rule in rent-seeking.

Suggested Citation

  • Randall G. Holcombe, 2017. "Political incentives for rent creation," Constitutional Political Economy, Springer, vol. 28(1), pages 62-78, March.
    • Handle: RePEc:kap:copoec:v:28:y:2017:i:1:d:10.1007_s10602-016-9228-4
    DOI: 10.1007/s10602-016-9228-4
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    References listed on IDEAS

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    Cited by:

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    2. Bryan P. Cutsinger & Alexander Marsella & Yang Zhou, 2022. "Insuring legislative wealth transfers: theory and evidence," Public Choice, Springer, vol. 192(1), pages 127-144, July.
    3. Peter K. Hazlett & Chandler S. Reilly, 2023. "Bureaucratic rent creation: the case of price discrimination in the market for postsecondary education," Constitutional Political Economy, Springer, vol. 34(2), pages 226-256, June.
    4. Randall G. Holcombe, 2019. "Transitional gains and rent extraction," Public Choice, Springer, vol. 181(1), pages 127-139, October.
    5. Matthew D. Mitchell, 2019. "Uncontestable favoritism," Public Choice, Springer, vol. 181(1), pages 167-190, October.
    6. Victor I. Espinosa & José Antonio Peña-Ramos & Fátima Recuero-López, 2021. "The Political Economy of Rent-Seeking: Evidence from Spain’s Support Policies for Renewable Energy," Energies, MDPI, vol. 14(14), pages 1-16, July.
    7. Randall G. Holcombe, 2023. "The transformative impact of rent-seeking theory on the study of public choice," Public Choice, Springer, vol. 196(1), pages 157-167, July.

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    More about this item

    Keywords

    Rent seeking; Rent dissipation; Transitional gains; Rent extraction; Elite theory;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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