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Policy making and rent-dissipation: An experimental test

  • David Bullock
  • E. Rutström

    ()

We present a transfer-seeking model of political economy that links the theory of Becker (1983) with Tullock-type models of politically contestable rents. In our model the size of the transfer is determined endogenously, and over-dissipation of rents is predicted even under conditions of risk-neutrality and perfect rationality. We implement an empirical test of this model by collecting behavioral data in a laboratory experiment. We confirm the existence of behavior that leads to over-dissipation of rents in games with both symmetric and asymmetric political power. To the extent that the transfer-seeking costs are social costs, our findings imply that the total costs of running government might be greatly underestimated if the value of the rent is used as a proxy for the rent-seeking cost. We also confirm the hypotheses that lowering the political power of one player can lead to smaller rent-seeking expenditures and to larger transfers Copyright Economic Science Association 2007

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File URL: http://hdl.handle.net/10.1007/s10683-006-9133-1
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Article provided by Springer in its journal Experimental Economics.

Volume (Year): 10 (2007)
Issue (Month): 1 (March)
Pages: 21-36

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Handle: RePEc:kap:expeco:v:10:y:2007:i:1:p:21-36
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102888

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  14. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993. "The Solution to the Tullock Rent-Seeking Game when r>2: Mixed-Strategy Equilibria and Mean Dissipation Rates," Purdue University Economics Working Papers 1039, Purdue University, Department of Economics.
  15. Anderson, Lisa R & Stafford, Sarah L, 2003. " An Experimental Analysis of Rent Seeking under Varying Competitive Conditions," Public Choice, Springer, vol. 115(1-2), pages 199-216, April.
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  18. James Andreoni & John H Miller, 1997. "Rational Cooperation in the finitely repeated prisoner's dilemma: experimental evidence," Levine's Working Paper Archive 670, David K. Levine.
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