Rent seeking and market competition

This paper emphasizes that political behavior of interest groups is a result of economic calculation, and therefore is affected by the market conditions under which they operate. We develop a two-stage game to link political and market decision-making. We find that if unproductive rent-seekingdirectly contributes to rent-seekers' market operations, then their lobbying efforts will be excessive if the number of outsiders is relatively large, restrained if it is relatively small. If rent-seekingdirectly impairs rent-seekers' market operations, the above described behavior will be reversed. The analysis also reveals that as wasteful rent-seeking may increase rent-seeker's production cost, market competition shifts production from now less efficient rent-seekers to their non-rent-seeking rivals. Welfare gains from this shift may overshadow the direct waste of influence activities.     

Rent seeking and the welfare cost of trade barriers

This paper estimates the potential social cost of trade barriers using the Harberger and the Tullock/Posner approaches for a sample of U.S. food and tobacco manufacturing industries. In addition, it tests the relationship between the computed welfare losses and special-interest political activity (PAC contributions). If all rents were dissipated through rent seeking, the social cost of trade barriers would be about 12.5 percent of domestic consumption and would be particularly large for sugar and milk products where quotas are the main instrument of protection. Furthermore, the results indicate that welfare losses are positively associated with industry lobbying but the strength of such association is strongly dependent on industry concentration.     

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.     

Rent seeking and hidden in-kind resource distortion: Some empirical evidence

We wish to thank John Jackson, Robert Hebert, Gordon Tullock and an anonymous referee for helpful comments on earlier draft of the paper.     

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.     

Rent seeking at 52: an introduction to a special issue of public choice

Public Choice - Regulation of health and safety has placed an unacknowledged burden on low-income households and workers. Billions of dollars are spent every year on regulations that seek to reduce...     

The rise and decline of regional power: A historical case-study of privilege seeking

This paper comprises one of Olson's findings about the rise and decline of nations and Tullock's idea of privilege-seeking. In the historical framework of Northern Europe the history of a town being closely linked with its saltern is investigated. It is shown that throughout the centuries rent- and privilege-seeking dominated. This was primarily done to avoid competition and, finally, to get excessive revenues. The sovereigns' production-costs of the privileges were low and Tullock's results of an efficient transfer mechanism are confirmed. Additionally, the findings of coalition-forming and mortgaging support the inevitable sclerotic process. Market activities find their political counterparts which is illustrated by the building and destroying of specific coalitions. A typical delay of privilege- and coalition-seeking is observed depending on the economic and political success. Regulatory measures are explored then “exploited”, and allies are found, “utilized” and dropped, finally leaving certified rents of no value.     

Rent seeking for madness: the political economy of mental asylums in the United States, 1870 to 1910

Public Choice - Recent studies indicate that the ideological stances of government parties no are longer associated with differences in total government spending. At the same time, we observe that...     

The decline in the number of school districts in the U.S.: 1950–1980

Between 1950 and 1980 the number of school districts fell from 83,642 to 15,987. Data for the fifty states for 1950, 1960, 1970, and 1980 are used to identify the factors that contributed to this decline. The focus is on the tradeoff between cost savings through scale economies (a few large districts) and a diverse population's demand for choice in public schooling (many small districts). We find that much of the decline in the number of school districts has resulted from: 1) the decline in the farm population and increase in population density, which has made it easier to take advantage of scale economies; 2) the growing importance of state aid, which reduces quality variation among districts within a state; and 3) the increase in the fraction of teachers that belong to the National Education Association teacher's union, which may reflect increased political influence used to lower the costs of organizing. Several states have laws that require school district and county (or state) boundaries to coincide. In the last section of the paper we estimate the costs of these laws. First, we compare the predicted number of districts, using the regression results in the earlier section of the paper, to the actual number in these states. Then we estimate a demand equation that is used to generate the dollar amount of the cost due to diminished interjurisdictional competition.     

权力寻租性腐败的危害及其治理

我国改革开放20多年来,随着社会经济的巨大发展,社会主义市场经济体制的建立,由于寻求财富的利益心理驱使、法律的不健全、制度的不规范,导致了寻租性腐败的客观存在,其危害极大,解决之道在于:一是制度治理,即加入WTO后,政府应加大政策障碍的治理力度;政府应加快机构改革,朝着精简、放权、廉洁、高效的方向发展;政府应加速产权制度的改革,明确真正独立经营的市场主体,维护市场秩序;政府应建立并完善更加符合市场规律的管理机制。二是权力管理,即建立高效的权力管理制约机制,提高权力者寻租的机会成本;建立有效的监督管理机制,惩治寻租性腐败;加强权力者的教育,构筑权力者抵御寻租欲望的心理防线。     

On the Measurement of Rent Seeking and its Social Opportunity Cost

Utilizing 4-digit industry data by county,we compare the allocation of resourcesacross industries in state capital areaswith noncapital areas. We are able toidentify which industries are expanded andcontracted relative to noncapital areas. Our results provide the first directevidence and measurement of the forgoneproductive activity resulting fromresources being reallocated toward rentseeking and interest group activity. Ourdata also allow us to measure total rentseeking, and also to isolate the extent ofindirect and in-kind rent seeking, whichcan account for part of the Tullockparadox.     

Neo-corporatist theory and the politics of industrial decline

Abstract. The case of the French textile and clothing industry during the post-1974 crisis period illustrates a number of issues relevant to the debate about meso-corporatism and interest intermediation at the sectoral level in industry. It highlights the importance of attempts to understand the relationships between organised interests and the state in the analysis of the policy process. The pattern of state-industry relations which evolved was crucial in determining the outcome of conflict between state and industry over the management of restructuring during the crisis.
The inapplicability of the meso-corporatist model to this case becomes clear. There was a conspicuous absence of either political exchange or a shared policy agenda, each an important element of corporatist patterns of policy formation, in both the formation and implementation of adjustment policies in the sector. Mutual suspicion and a struggle to control the terms of the debate yielded a low level of co-operation. Eventually the industry was able to appropriate increased public funds on its own terms and to insist on a protective trade regime.
The complexity of the case points to the need to broaden the debate over models of interest intermediation and to relate it to issues in political economy. This is particularly important with regard to the structure of the bureaucratic state and notions of state autonomy.     

论学校效能及学校有效管理

学校工作变得越来越复杂,要求也越来越高,效率、效益和效能一直是学校组织管理者们所追求的价值和目标。分析研究学校效能对于提高我国学校运行的效率及效益,从而提高办学水平和质量,都有着重要的理论和实践价值。本文试图从效能的影响因素,去总结探求效能建设的有效途径,从而更好地指导学校的管理工作。     

Rent seekers who demand government production: Bureaucratic output and the price of complements

Many goods and services produced by government bureaus are sold at prices which do not maximize net revenues (maximize profits or minimize losses). Indeed, bureaucratic institutions typically create incentives to expand production beyond that which would maximize net revenues. Furthermore, many of the products sold by government bureaus are highly complementary to privately produced goods and services. If a bureau's output is not priced to maximize net revenues, then private sellers of various complements may be in a position to extract rents by adjusting their prices. This paper explores the implications of bureaucratically generated rents for privately produced complements. First, rent seeking can materialize when private sector interests apply pressure for expanded bureau production and lower bureau prices. Second, if the bureau does expand its production capacity beyond the net revenue maximizing level, and if a private producer obtains exclusive rights to supply complements, then the extraction of rents will result in an inefficient mix of resources in bureaucratic production. The basis of the inefficiency is not the reason often given, however. Rather, inefficiencies arise because the actual level of use is less than that which the ‘bureaucratic plant’ was constructed to produce due to the relatively high price of the complementary services.     

A culture of rent seeking

Public Choice - Tullock [J Dev Econ 67(2):455–470, 1967] introduced the concept of rent seeking and highlighted the social costs associated with collecting and lobbying for or against...     

The decline of the idea of progress

The philosphers of the Englightenment conceived Progress as evidence of mankind's natural perfectibility. In the nineteenth century this image of the future was tarnished by abrupt epistemological changes and technical surprises. An unforeseen consequence of the invention and use of the steam engine was the breaking up of on idea that had acted as a principle for preservingt values, caused by the principle of the dissipation of energy in physics and the revolutionary analyses of the relations of socio-economic inequality in industrial societies. With Freud and Levi-Strauss, Carnot's principle becam the principle for judging history.