Imperfect rent dissipation with unionized labor

Traditional rent-seeking theory focused only on socially wasteful expenditures by firms competing for restrictive regulations. More recently, rent-defending expenditures by consumers have also been taken into account. This paper extends the analysis by adding rent-sharing expenditures by organized labor. The paper merges the Tullock lottery model and the monopoly union model and considers both a costless and a costly wage bargaining mechanism. The participation of consumers and workers in the distributional contest is shown to reduce, rather than increase, the social cost of restrictive regulations. The participation of consumers and workers also raises the probability of deregulation.