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Firm Size, Economic Situation and Influence Activities

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  • Kräkel, Matthias

    (University of Bonn)

Abstract

This paper discusses the optimal firm size in the presence of influence activities, and the level of individual rent-seeking dependent on the economic situation of the firm. Since firm size has a discouraging effect on the level of individual rent-seeking but also a quantity effect as the number of rent-seekers increases, the interplay of both effects determines whether the employer chooses an inefficiently small or large firm size. In the given setting, a bad economic situation leads to both a higher probability of a substantial loss and a reduction of productivity. The productivity effect and the two other effects together determine the optimal level of individual rent-seeking.

Suggested Citation

  • Kräkel, Matthias, 2006. "Firm Size, Economic Situation and Influence Activities," IZA Discussion Papers 2391, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp2391
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    References listed on IDEAS

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    More about this item

    Keywords

    economic situation; firm size; influence activities; politicking; rent-seeking;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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