Abstract

http://ssrn.com/abstract=607922
 
 

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Crowding-Out in Productive and Redistributive Rent-Seeking


Giuseppe Dari-Mattiacci


University of Amsterdam - Amsterdam Center for Law and Economics (ACLE); Tinbergen Institute

Eric Langlais


EconomiX, CNRS & University of Paris Ouest

Bruno Lovat


Nancy-Université - Universite Nancy 2

Francesco Parisi


University of Minnesota - Law School; University of Bologna


George Mason Law & Economics Research Paper No. 04-47
Public Choice, Forthcoming

Abstract:     
This paper presents a general rent-seeking model in which participants decide on entry before choosing their levels of efforts. The conventional wisdom in the rent-seeking literature suggests that the rent dissipation increases with the number of potential participants and with their productivity of effort. In this paper, we show that this result of the rent-seeking literature is far from general and applies only when participants are relatively weak and enter the game with certainty. In the presence of strong competitors, the expected total dissipation actually decreases, since participation in the game is less frequent. We further consider the impact of competitors' exit option, distinguishing between "redistributive rent-seeking" and "productive rent-seeking" situations. In redistributive rent-seeking, no social loss results from the fact that all competitors exit the race. In productive rent-seeking, instead, lack of participation creates a social loss (the "lost treasure" effect), since valuable rents are left unexploited. We show that the lost-treasure effect perfectly counterbalances the reduction in rent dissipation due to competitors' exit. Hence, unlike redistributive rent-seeking, in productive rent-seeking the total social loss remains equal to the entire rent even when parties grow stronger or the number of players increases.

Number of Pages in PDF File: 31

Keywords: Rent-seeking, rent dissipation, Tullock's paradox

JEL Classification: C72, D72, K00

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Date posted: October 21, 2004  

Suggested Citation

Dari-Mattiacci, Giuseppe and Langlais, Eric and Lovat, Bruno and Parisi, Francesco, Crowding-Out in Productive and Redistributive Rent-Seeking. George Mason Law & Economics Research Paper No. 04-47; Public Choice, Forthcoming. Available at SSRN: http://ssrn.com/abstract=607922 or http://dx.doi.org/10.2139/ssrn.607922

Contact Information

Giuseppe Dari-Mattiacci (Contact Author)
University of Amsterdam - Amsterdam Center for Law and Economics (ACLE) ( email )
Roeterstraat 11
Amsterdam, 1018WB
Netherlands
HOME PAGE: http://darimattiacci.acle.nl
Tinbergen Institute
Roetersstraat 31
Amsterdam, 1018 WB
Netherlands
HOME PAGE: http://scholar.google.com/citations?user=AuUfjxUAAAAJ&hl=en
Eric Langlais
EconomiX, CNRS & University of Paris Ouest ( email )
200 Avenue de la République
Nanterre, 92200
France
HOME PAGE: http://economix.u-paris10.fr/fr/membres/?id=889
Bruno Lovat
Nancy-Université - Universite Nancy 2 ( email )
Nancy
France
Francesco Parisi
University of Minnesota - Law School ( email )
229 19th Avenue South
Minneapolis, MN 55455
United States
University of Bologna ( email )
Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
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