IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v26y2021i4p5349-5362.html
   My bibliography  Save this article

The impact of rent‐seeking on economic growth in the six geographic regions: Evidence from static and dynamic panel data analysis

Author

Listed:
  • Sami Fethi
  • Hatice Imamoglu

Abstract

This paper empirically investigates the impact of rent‐seeking on economic growth by introducing an augmented Solow growth model over the period 2010–2015. Static and dynamic panel regression models are employed to investigate this impact for the six geographic regions, namely, Sub‐Saharan Africa, East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, and South Asia according to the World Bank's classification. Results reveal that the impact of control for rent‐seeking on economic growth is found highly significant and positive for most of the regions however, no significant effect could detect on the control for rent‐seeking on economic growth for advanced economies. Results also show that there exists mixed evidence between gross fixed capital as a percentage of gross domestic product, Employment ratio and economic growth for the six geographic regions. The results can be interpreted in favour of the advanced economies that they can relatively handle the rent‐seeking problem compared to the relatively weak economies due to much better political and economic stability, better administrative mechanism, stronger law system, more adequate public services, better health, and education system as well as more advanced infrastructure.

Suggested Citation

  • Sami Fethi & Hatice Imamoglu, 2021. "The impact of rent‐seeking on economic growth in the six geographic regions: Evidence from static and dynamic panel data analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5349-5362, October.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:4:p:5349-5362
    DOI: 10.1002/ijfe.2069
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.2069
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.2069?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Rowley, Charles K., 2000. "Political culture and economic performance in sub-Saharan Africa," European Journal of Political Economy, Elsevier, vol. 16(1), pages 133-158, March.
    2. Mork, Knut Anton, 1993. " Living with Lobbying: A Growth Policy Co-opted by Lobbyists Can Be Better than No Growth Policy at All," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 597-605, December.
    3. Anke E. Hoeffler, 2002. "The augmented Solow model and the African growth debate," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(2), pages 135-158, May.
    4. Harold J. Brumm, 1999. "Rent Seeking and Economic Growth: Evidence from the States," Cato Journal, Cato Journal, Cato Institute, vol. 19(1), pages 7-16, Spring/Su.
    5. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    6. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    7. Konstantinos Angelopoulos & George Economides, 2008. "Fiscal policy, rent seeking, and growth under electoral uncertainty: theory and evidence from the OECD," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(4), pages 1375-1405, November.
    8. Jagdish N. Bhagwati, 1968. "Distortions and Immiserizing Growth: a Generalization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 35(4), pages 481-485.
    9. Mohtadi, Hamid & Roe, Terry, 1998. "Growth, lobbying and public goods," European Journal of Political Economy, Elsevier, vol. 14(3), pages 453-473, August.
    10. Paul Dragos Aligica & Vlad Tarko, 2015. "Crony Capitalism," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(03), pages 27-32, October.
    11. Arye L. Hillman & Heinrich W. Ursprung, 2016. "Where are the rent seekers?," Constitutional Political Economy, Springer, vol. 27(2), pages 124-141, June.
    12. A. Vindelyn Smith-Hillman, 2007. "Competition policy, inflation and corruption: evidence from African economies," Applied Economics Letters, Taylor & Francis Journals, vol. 14(9), pages 653-656.
    13. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 503-530.
    14. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969, December.
    15. Marcelo Soto, 2009. "System GMM Estimation With A Small Sample," UFAE and IAE Working Papers 780.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    16. Charles D. De Lorme & David R. Kamerschen & John M. Mbaku, 1986. "Rent Seeking in the Cameroon Economy: Krueger's Analytic Technique Helps to Account for Development Lag in Colonial States," American Journal of Economics and Sociology, Wiley Blackwell, vol. 45(4), pages 413-423, October.
    17. Charles DeLorme & Stacey Isom & David Kamerschen, 2005. "Rent seeking and taxation in the Ancient Roman Empire," Applied Economics, Taylor & Francis Journals, vol. 37(6), pages 705-711.
    18. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    19. Gordon Tullock, 1988. "The costs of rent seeking: A metaphysical problem," Public Choice, Springer, vol. 57(1), pages 15-24, April.
    20. Emmanuel Ampofo‐Tuffuor & Charles D. DeLorme & David R. Kamerschen, 1991. "The Nature, Significance, and Cost of Rent Seeking in Ghana," Kyklos, Wiley Blackwell, vol. 44(4), pages 537-559, November.
    21. Stanley L. Engerman & Kenneth Lee Sokoloff, 2002. "Factor Endowments, Inequality, and Paths of Development Among New World Economies," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2002), pages 41-110, August.
    22. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    23. Christian Dreger & Teymur Rahmani & Hans-Friedrich Eckey, 2007. "Economic Convergence and Rent-Seeking in Iran," Discussion Papers of DIW Berlin 741, DIW Berlin, German Institute for Economic Research.
    24. Felipe Starosta de Waldemar, 2010. "How costly is rent-seeking to diversification: an empirical approach," Documents de travail du Centre d'Economie de la Sorbonne 10008, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    25. Paolo Mauro, 2004. "The Persistence of Corruption and Slow Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 1-1.
    26. Durden, Garey, 1990. "The Effect of Rent-Seeking on Family Income Levels: Some Suggestive Empirical Evidence," Public Choice, Springer, vol. 67(3), pages 285-291, December.
    27. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-827, August.
    28. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    29. Delano S Villanueva & Roberto S Mariano & Diwa C Guinigundo & Abbas Mirakhor, 2023. "Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach," World Scientific Book Chapters, in: Economic Adjustment and Growth Theory and Practice, chapter 2, pages 10-43, World Scientific Publishing Co. Pte. Ltd..
    30. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    31. Daron Acemoglu & Simon Johnson & James A. Robinson, 2002. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1231-1294.
    32. Fudenberg, Drew & Tirole, Jean, 1987. "Understanding Rent Dissipation: On the Use of Game Theory in Industrial Organization," American Economic Review, American Economic Association, vol. 77(2), pages 176-183, May.
    33. Min Jeong Park, 2007. "Rent Seeking in Korean Government Budget Allocation," International Review of Public Administration, Taylor & Francis Journals, vol. 12(2), pages 33-44, January.
    34. Charles D. DeLorme & David R. Kamerschen & David C. Redman, 1992. "The First U.S. Food Stamp Program: An Example of Rent Seeking and Avoiding," American Journal of Economics and Sociology, Wiley Blackwell, vol. 51(4), pages 421-421, October.
    35. Lisa Basurto & Charles Delorme & David Kamerschen, 2001. "Rent Seeking, The Bracero Program And Current Mexican Farm Labor Policy," International Economic Journal, Taylor & Francis Journals, vol. 15(1), pages 21-40.
    36. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    37. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    38. Robert D. Tollison, 1982. "Rent Seeking: A Survey," Kyklos, Wiley Blackwell, vol. 35(4), pages 575-602, November.
    39. Heba E. Helmy, 2013. "The impact of corruption on FDI: is MENA an exception?," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(4), pages 491-514, July.
    40. Sharif Mohammad & John Whalley, 1984. "Rent Seeking in India: Its Costs and Policy Significance," Kyklos, Wiley Blackwell, vol. 37(3), pages 387-413, August.
    41. Knack, Stephen & Keefer, Philip, 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators," MPRA Paper 23118, University Library of Munich, Germany.
    42. Rama, Martin, 1993. "Rent seeking and economic growth : A theoretical model and some empirical evidence," Journal of Development Economics, Elsevier, vol. 42(1), pages 35-50, October.
    43. Bhagwati, Jagdish N & Srinivasan, T N, 1980. "Revenue Seeking: A Generalization of the Theory of Tariffs," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1069-1087, December.
    44. Latkov, Andrey, 2014. "Trends of Rent-seeking Theory," MPRA Paper 62864, University Library of Munich, Germany.
    45. Robert D. Tollison & Roger D. Congleton (ed.), 1995. "The Economic Analysis Of Rent Seeking," Books, Edward Elgar Publishing, number 592.
    46. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
    47. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, vol. 83(2), pages 409-414, May.
    48. David Laband & John Sophocleus, 1988. "The social cost of rent-seeking: First estimates," Public Choice, Springer, vol. 58(3), pages 269-275, September.
    49. Stephanie Matti, 2010. "Resources and Rent Seeking in the Democratic Republic of the Congo," Third World Quarterly, Taylor & Francis Journals, vol. 31(3), pages 401-413.
    50. Zhou, Huizhong, 1995. "Rent Seeking and Market Competition," Public Choice, Springer, vol. 82(3-4), pages 225-241, March.
    51. Urs Steiner Brandt & Gert Tinggaard Svendsen, 2003. "Bureaucratic Rent-Seeking in the European Union," Working Papers 46/03, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    52. Wenders, John T, 1987. "On Perfect Rent Dissipation," American Economic Review, American Economic Association, vol. 77(3), pages 456-459, June.
    53. Nazrul Islam, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 1127-1170.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Cheng & Zhou, Bo & Tian, Xuan, 2022. "Political connections and green innovation: The role of a corporate entrepreneurship strategy in state-owned enterprises," Journal of Business Research, Elsevier, vol. 146(C), pages 375-384.
    2. Dokas, Ioannis & Panagiotidis, Minas & Papadamou, Stephanos & Spyromitros, Eleftherios, 2023. "Does innovation affect the impact of corruption on economic growth? International evidence," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 1030-1054.
    3. Yok-Yong Lee & Kim-Leng Goh, 2023. "The Happiness-Economic Well-Being Nexus: New Insights From Global Panel Data," SAGE Open, , vol. 13(4), pages 21582440231, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Iqbal, Nasir & Daly, Vince, 2014. "Rent seeking opportunities and economic growth in transitional economies," Economic Modelling, Elsevier, vol. 37(C), pages 16-22.
    2. Aleksandar Vasilev, 2013. "On the cost of rent-seeking by government bureaucrats in a Real-Business-Cycle framework," Working Papers 2013_20, Business School - Economics, University of Glasgow.
    3. Park, Jun-ki & Ryu, Deockhyun & Lee, Keun, 2019. "What determines the economic size of a nation in the world: Determinants of a nation’s share in world GDP vs. per capita GDP," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 203-214.
    4. Vasilev, Aleksandar, 2013. "Essays on Real Business Cycle Modeling and the Public Sector," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 130522, October.
    5. Vianna, Andre C. & Mollick, Andre V., 2018. "Institutions: Key variable for economic development in Latin America," Journal of Economics and Business, Elsevier, vol. 96(C), pages 42-58.
    6. Siddiqui, Danish Ahmed & Ahmed, Qazi Masood, 2013. "The effect of institutions on economic growth: A global analysis based on GMM dynamic panel estimation," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 18-33.
    7. Eric Akobeng, 2017. "Gross Capital Formation, Institutions and Poverty in Sub-Saharan Africa," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 20(2), pages 136-164, April.
    8. Andrea Asoni, 2008. "Protection Of Property Rights And Growth As Political Equilibria," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 953-987, December.
    9. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    10. Daniel Oto Peralías & Daniel Oto-Peralías & Diego Romero-Ávila, 2012. "Tracing the Link between Government Size and Growth: The Role of Public Sector Quality," EcoMod2012 4015, EcoMod.
    11. Ahmad, Mahyudin & Marwan, Nur Fakhzan, 2012. "Economic growth and institutions in developing countries: Panel evidence," MPRA Paper 42293, University Library of Munich, Germany.
    12. Lee, Keun & Kim, Byung-Yeon, 2009. "Both Institutions and Policies Matter but Differently for Different Income Groups of Countries: Determinants of Long-Run Economic Growth Revisited," World Development, Elsevier, vol. 37(3), pages 533-549, March.
    13. Ahmad, Mahyudin & Hall, Stephen G., 2012. "Do institutions matter for growth? Evidence from East Asian countries," MPRA Paper 42158, University Library of Munich, Germany.
    14. Rabah Arezki & Frederick van der Ploeg, 2011. "Do Natural Resources Depress Income Per Capita?," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 504-521, August.
    15. Saima Nawaz & M. Idrees Khawaja, 2016. "Fiscal Policy, Institutions And Growth: New Insights," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1251-1278, December.
    16. Slesman, Ly & Baharumshah, Ahmad Zubaidi & Ra'ees, Wahabuddin, 2015. "Institutional infrastructure and economic growth in member countries of the Organization of Islamic Cooperation (OIC)," Economic Modelling, Elsevier, vol. 51(C), pages 214-226.
    17. Mr. Serhan Cevik & João Tovar Jalles, 2023. "Eye of the Storm: The Impact of Climate Shocks on Inflation and Growth," IMF Working Papers 2023/087, International Monetary Fund.
    18. Nawaz, Saima, 2015. "Growth effects of institutions: A disaggregated analysis," Economic Modelling, Elsevier, vol. 45(C), pages 118-126.
    19. Natkhov, T. & Polishchuk, L., 2017. "Political Economy of Institutions and Development: The Importance of Being Inclusive. Reflection on "Why Nations Fail" by D. Acemoglu and J. Robinson. Part I. Institutions and Economic Devel," Journal of the New Economic Association, New Economic Association, vol. 34(2), pages 12-38.
    20. Nawaz, Saima, 2011. "The Institutions-Growth Nexus: Stages of Development," MPRA Paper 36961, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:ijfiec:v:26:y:2021:i:4:p:5349-5362. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.