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Rent-Seeking in Natural Resource Quota Allocations

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  • Boyce, John R

Abstract

This paper examines the incentives for rent-seeking in the allocation of natural resource quotas to competing user groups by political bodies. The political body has discretion in making the allocation, and competing user groups rent-seek to influence the allocation. The author investigates ways in which the governmental body can affect the behavior of the players by setting the ground rules for the competition. A political body can affect an allocatively (Pareto) efficient outcome by choosing an appropriate default (pre rent-seeking) policy. Surprisingly, an allocatively efficient default policy is unlikely to minimize social costs. However, winner-take-all default policies are likely to maximize, not minimize, rent-seeking. A competitive postallocation market reduces rent-seeking, but is not, either itself or in combination with an efficient default policy, capable of minimizing social costs. However, forcing winners in political redistributions to fully compensate losers both lowers the rent-seeking levels relative to a potential compensation criterion and, when used together with an efficient default policy, is capable of obtaining the first-best solution of an allocatively efficient allocation with zero rent-seeking. Copyright 1998 by Kluwer Academic Publishers

Suggested Citation

  • Boyce, John R, 1998. "Rent-Seeking in Natural Resource Quota Allocations," Public Choice, Springer, vol. 96(3-4), pages 271-294, September.
  • Handle: RePEc:kap:pubcho:v:96:y:1998:i:3-4:p:271-94
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    Cited by:

    1. Farhad Nili & Gabriel Talmain, "undated". "Rent-seeking, Occupational Choice and Oil Boom," Discussion Papers 01/11, Department of Economics, University of York.
    2. Harald Bergland & Derek J. Clark & Pål Andreas Pedersen, 2001. "Rent-seeking and Quota Regulation of a Renewable Resource," Studies in Economics 0106, School of Economics, University of Kent.
    3. Sonia Schwartz, 2009. "Comment distribuer les quotas de pollution ?. Une revue de la littérature," Revue d'économie politique, Dalloz, vol. 119(4), pages 535-568.
    4. Dijkstra, Bouwe R., 2007. "An investment contest to influence environmental policy," Resource and Energy Economics, Elsevier, vol. 29(4), pages 300-324, November.
    5. Bergland, Harald & Clark, Derek J. & Pedersen, Pal Andreas, 2002. "Rent-seeking and quota regulation of a renewable resource," Resource and Energy Economics, Elsevier, vol. 24(3), pages 263-279, June.

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