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Rent Seeking

Author

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  • Shankha Chakraborty
  • Era Dabla-Norris

Abstract

This paper examines the relationship between rent seeking and economic performance when governments cannot enforce property rights. With imperfect credit markets and a fixed cost of rent seeking, only wealthy agents choose to engage in it, since it enables them to protect their wealth from expropriation. Hence, the level of rent seeking and economic performance are determined by the initial distribution of income and wealth. When individuals also differ in their productivity, not all wealthy agents become rent seekers and the social costs of rent seeking are typically lower. In both cases, multiple equilibria with different levels of rent seeking and production are possible.

Suggested Citation

  • Shankha Chakraborty & Era Dabla-Norris, 2005. "Rent Seeking," IMF Working Papers 05/43, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:05/43
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    Cited by:

    1. Iqbal, Nasir & Daly, Vince, 2014. "Rent seeking opportunities and economic growth in transitional economies," Economic Modelling, Elsevier, vol. 37(C), pages 16-22.

    More about this item

    Keywords

    Rent seeking; Income distribution; probability; expropriation; equation; credit markets; increasing returns; Personal Income; Wealth; and Their Distributions; Models of Political Processes: Rent-seeking; Elections; Legislatures; and Voting Behavior; Macroeconomic Analyses of Economic Development;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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