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.