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Rent Seeking in Elite Networks

Author

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  • Rainer Haselmann
  • David Schoenherr
  • Vikrant Vig

Abstract

We employ a unique data set on members of an elite service club in Germany to investigate how social connections in elite networks affect the allocation of resources. Specifically, we investigate credit allocation decisions of banks to firms inside the network. Using a quasi-experimental research design, we document misallocation of bank credit inside the network, with bankers with weakly aligned incentives engaging most actively in crony lending. Our findings, thus, resonate with existing theories of elite networks as rent extractive coalitions that stifle economic prosperity.

Suggested Citation

  • Rainer Haselmann & David Schoenherr & Vikrant Vig, 2018. "Rent Seeking in Elite Networks," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1638-1690.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/697742
    DOI: 10.1086/697742
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    More about this item

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K39 - Law and Economics - - Other Substantive Areas of Law - - - Other

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