The number of rent-seekers and aggregate rent-seeking expenditures: An unpleasant result

I examine a rent-seeking contest in which the winner gets a minimum rent but also gets an additional rent which is an increasing function of his lobbying expenditure. I give real-world examples of such rent-seeking competitions. Contrary to the standard result in the rent-seeking literature, I obtain the perverse result that aggregate rent-seeking expenditures may be inversely related to the number of rent-seekers. However, I note that even if this result holds, the cost of administering rent-seeking competitions may imply that society is better off with fewer contenders than with an infinitely large number of contenders, although the optimal number may not be the smallest number.     

The optimal subsidization of Baptists by bootleggers

Rent-seeking bootleggers have an incentive to subsidize the lobbying activities of the public-interest minded Baptists. We demonstrate that unless a certain set of conditions hold, the optimal subsidy will be positive and will provide a moral smoke screen for rent-seeking activities. Consequently, it will be extremely difficult to identify the actual level of rent-seeking from the public interest activities. Therefore, current empirical estimates may well underestimate the actual level of rent-seeking in the regulatory arena.I am indebted to Garey Durden for several enlightening discussions on rent-seeking and regulation and helpful comments on an earlier version of this paper.     

Rent seeking and rent setting with asymmetric effectiveness of lobbying

This paper provides a more general model of the determination of rent-seeking costs by combining the following features: endogenous rent determination, asymmetric effectiveness of contending agents in their lobbying efforts, and multiple periods. In doing so, the paper generalizes some aspects of the work of Applelbaum and Katz (1987), Rogerson (1982), Leininger (1992) and Kohli (1992). Some results obtained are: (i) in the short run, when the regulator's salary is higher than in an alternative occupation, both the per unit cost of rent-seeking and the total rent set by regulator are highest for the same value of the relative effectiveness parameter; (ii) in the long run, an increase in the effectiveness parameter leads to a reduction in the social costs of rent seeking; (iii) in a repeated game, the equilibrium rent is lower the higher is the regulator's discount factor.     

Improper Selection of High-Cost Producers in the Rent-Seeking Contest

The resources two rival businesses spend to raise their own chanceof getting a unique monopoly license are a cost of rent-seeking.When those businesses differ in the costs of producing themonopoly good there is an additional cost of rent-seeking that hasnot been sufficiently studied in the literature. If the high cost producer winsthe license, the difference between his cost and the costs of hismore efficient rival is a social loss from improper selection ofproducers by the political process. The loss becomes more severewhen the ability to lobby of the inefficient producer outstripsthat of the efficient producer. This may help to explain whyspecialized lobbying evolved. Specialized lobbying reduces thesocial cost from improper selection of firms by allowing efficientproducers to hire expert rent-seekers and so to raise theirchances of gaining monopoly concessions.     

The debt wish: Rent seeking by business groups and the structure of corporate borrowing in India

Business groups play an important role in emerging economies. The transactions cost perspective, which has dominated our understanding of such groups, argues that the emergence of business groups is a natural response to market failures in developing countries. In this paper, we propose an alternate theoretical perspective – the rent-seeking view – that takes these groups as engaging in coordinated lobbying for the capture of rents created by governments. We develop and implement an empirical strategy to test for the rent-seeking view drawing from the property rights theory of corporate finance. We find strong empirical support for the rent-seeking view using a large cross-sectional data-set of firms in India.     

The dynamics of lobbying — A differential game

This paper presents a dynamic model on lobbying. The interactions between two competing lobbies, who attempt to influence regulations and legislation, are modelled as a differential game. We consider for this game first a time consistent and then a subgame perfect equilibrium (in linear Markov strategies). The subgame perfect equilibrium lowers considerably lobbying activity and expenses. This provides a partial explanation of the puzzle that rent-seeking expenses are often small compared with the prize sought.     

Cooperative lobbying and endogenous trade policy

This paper considers trade policies in a small open economy in which two influential interest groups lobby the government. Since competitive lobbying leads to excessive rent-seeking expenditures, the lobbies have an incentive to cooperate. The outcome of cooperative lobbying is characterized in terms of lobbying and bargaining power of the two groups. Two important results are derived. First, if the power of competing interest groups is balanced, then cooperation leads to free trade. Second, if it is unbalanced, cooperation may, on the contrary, increase protection.     

The lobbyist with ‘balls of iron and a spine of steel’: why Ireland needs lobbying reform

• In common with most other nations, Ireland currently has no statutory regulation of lobbying activities. Equally, and also in common with many countries, lobbying regulation is becoming a more prominent subject of political debate. This paper considers the pervasive context of political corruption and scandal highlighted by one lobbyist now in jail, analyses various suggestions for lobbying regulation which have been proposed, and concludes with a potential reform agenda. The opportunity exists for Ireland to take a lead in producing a comprehensive and meaningful regulatory regime—genuine and principled reform, rather than a muddled compromise.

Copyright © 2009 John Wiley & Sons, Ltd.     

Kyoto Protocol cooperation: Does government corruption facilitate environmental lobbying?

Does environmental lobbying affect the probability of environmental treaty ratification? Does the level of government corruption play a role for the success of such lobbying? In this paper, we propose that a more corruptible government may be more responsive to the demands of the environmental lobby. We use several stratified hazard models and panel data from 170 countries on the timing of Kyoto Protocol ratification to test this hypothesis. We find that increased environmental lobby group activity raises the probability of ratification, and the effect rises with the degree of corruption.     

Asymmetry and Corrective Public Policy in Contests

The proposal of an inefficient policyusually stimulates a political strugglebetween the affected interest groups. Theresulting wasteful lobbying activities mayreduce welfare, even if the proposed policyis not approved. In this paper weshow that sufficient asymmetry in payoffsnot only tends to reduce lobbying effortsin standard rent-seeking contests, as iswell known, but it is, in fact, a necessarycondition for the implementation of asuccessful effective correctivetax-transfer policy that complements theproposal of the inefficient policy. Such apolicy induces an efficient equilibriumoutcome which is, in addition, optimal fromthe viewpoint of the players that take partin the public-policy game.     

Free-riding on rent seeking—an empirical analysis

The Common Agricultural Policy is modelled as a club good providing the European Union (EU) farmer with financial benefits. We build an economic model which explains how much farmers in individual EU countries invest in rent-seeking activities in order to test for free-riding behaviour on lobbying costs. For our investigation we group the EU member countries by farm structure, and the type of benefit received. We explain the fees paid by farmers for lobbying by other countries’ fees, political variables, and country and regional agricultural characteristics. The model shows that some member countries free ride on others suggesting a form of policy path dependency.     

Corruption, federalism, and policy formation in the OECD: the case of energy policy

We investigate whether the effect of government corruption is conditional on a country’s institutional structure. Federal systems have an additional layer of government, making lobbying relatively more costly. We investigate whether the effect of government corruption on environmental policy (in the form of restrictions on energy use) is conditional on a federal system being in place. Using 1982–96 data from 11 industry sectors in 12 OECD economies we find that while greater government corruption reduces the stringency of environmental policy, the effect declines in federal systems.     

Rent-seeking,political influence and inequality: A simple analytical example

A simple model allowing an analysis of the interaction between economic policy decisions and rent-seeking by private agents competing for political influence, is developed. Rent-seeking may be of the directly unproductive type, requiring resources that are withdrawn from productive activities, or it may manifest itself as income transfers (corruption) to political decisionmakers. In the political-economic equilibrium of the model the extent of rent-seeking, economic policy decisions, income inequality, etc. are endogenously determined.     

Cultural institutions and value formation on the art market: A rent-seeking approach

The formation of value in the artistic market can be specifically affected by the behavior of cultural institutions, acting on it as monopolistic quality certifiers. The rent-maximizing strategy limits quantities to sub-optimum levels and keeps prices and costs higher. This can be worsened by institutional rent-seeking. The establishment's strategies cannot always be matched through public policies, because this can result in an increase of monopoly social losses and of the establishment's lobbying efforts.     

The Persistence of Corruption and Regulatory Compliance Failures: Theory and Evidence

This paper examines the reasons whycorruption and policy distortions tend toexhibit a high degree of persistence incertain regimes. We identify circumstancesunder which a firm seeks to evaderegulations through (i) bribery of localinspectors, and (ii) by lobbying high-levelgovernment politicians to resist legalreforms designed to improve judicialefficiency (rule of law) and eliminatecorruption. We show that in some casespolitical instability reinforces thesetendencies. The analysis predicts that inpolitically unstable regimes, theinstitutions necessary to monitor andenforce compliance are weak. In suchcountries, corruption therefore is morepervasive, and the compliance withregulations is low. We test thesepredictions using cross-country data. Theempirical results support the predictionsof the model. Political instability reducesjudicial efficiency, which in turnstimulates corruption. Thus, the effect ofpolitical instability on corruption is notdirect, but occurs indirectly via itseffect on the degree of judicialefficiency. Finally, corruption lowers thelevel of regulatory compliance. Thus,political instability indirectly affects compliance, via judicial efficiency andcorruption.     

Clientelism,corruption, and the allocation of resources

Corruption has been shown to have more serious effects upon allocation than simply drawing resources into rent-seeking activities. If politicians anticipate gains from corruption in the policy making process, sub-optimal policies will be the result. Typical examples include excessive nationalization of industry, excessive regulation of the private sector through practices such as licensing and quotas with a view to extract the rent created by these measures. In addition, further misallocation will result at the execution state. It has been shown that the revisionists were wrong in assuming that licenses and contracts will be allocated to the most efficient producers, that rent will be eliminated in government employment, and that corruption increases the efficiency of the bureaucracy. Moreover, differential access to government services leads to additional allocative losses.     

政府与市场关系的调适:破解反腐困局的根本路径

中国的腐败问题具有深刻的制度根源,即计划机制与市场机制双轨并行下的"增量改革"及其与之相配套的各项体制机制设计。一方面,公有企业固有的垄断冲动与政府规制触角无孔不入的延伸,大大拓展了政府的寻租空间,为官员腐败培育了肥沃的土壤;另一方面,监督机制的软弱与虚化,更是在一定程度上刺激了腐败现象的发生。通过对政府与市场关系以及这组关系的变动对腐败问题所产生的影响进行深入的考察,结合我国独具特色的渐进主义转型模式在当前阶段所面临的困境与挑战,厘清政府与市场的合理边界,继续科学地调适政府与市场的关系,进一步深化市场化改革,才是破解反腐困局的根本出路。     

社区居民委员会与业主委员会的权利结构及其在北京市政策执行中的演化

在城市社区中，居民委员会和业主委员会是两个非常重要的自治组织，这两个理论上看似相辅相成的自治组织在现实中却关系复杂，复杂关系的背后实际上是政府的政策在左右。本文通过对北京市社区中居民委员会和业主委员会相关政策的研究，特别是对政府政策取向以及相关组织的利益关系的剖析，发现政府厚此薄彼的政策取向以及控制寻租机会是问题的核心，解决问题的关键在于政策设计应以尊重权利为要义，在具体的制度安排上应以控制腐败、防止附加性政策为核心，在具体行政活动中应以依法行政为基本操守，唯其如此才能防止魔鬼隐藏在政策细节中作祟。     

Corruption: Governance challenge towards reducing unemployment in Nigeria

The study examines the possibility of having a very low rate of unemployment in Nigeria, if there is a reduced rate of corruption in the long-term. While using cointegration regressions and Vector Error Correction Mechanism (VECM) over the period 1996–2020, it is affirmed that corruption could increase unemployment rate in the long run. The two corruption indicators employed (control of corruption and corruption index) are found to have a substantial effect on unemployment rate. Further evidence confirms that corruption and unemployment are cyclically interdependent. Findings indeed stress that a high level of corruption is harmful to employment growth. On the other hand, in the absence of sufficient job opportunities, rent-seeking government officials would be more interested in collecting bribes from job seekers, which results in sustained unlawful practices among the public officials. Thus, adopting effective corruption-control measures is critical. It is therefore suggested that to effectively tackle corruption incidents, there should be incentives for citizens or public officials to report bribery and the process of reporting corruption incidents should be further simplified. Strengthening anti-corruption agencies and developing a sound legal framework that promotes a culture of lawfulness and impeccable practices in the public sector are central.     

Dictator,Loyal, and Opportunistic Agents: The Soviet Archives on Creating the Soviet Economic System

Studies of the mature Soviet economy focus on the structuralweaknesses of rent seeking and corruption. Such an economy ispresumed to perform better in its adolescent phase under astrong stationary-bandit dictator, dedicated to growth andable to control rent-seekers. We use the recently openedSoviet state and party archives to show the process that beganin the 1930s of transforming the inner circle of the Sovietstationary bandit into a rent-seeking bureaucracy lackinglong-term goals.