Rent-Seeking for Public Goods: Group’s Size and Wealth Heterogeneity

28 Pages Posted: 28 Aug 2011

See all articles by Oskar Nupia

Oskar Nupia

Universidad de los Andes, Colombia - Department of Economics

Date Written: July 8, 2011

Abstract

In this paper, we study how between-group wealth and size heterogeneity affect success probabilities as well as aggregate rent-seeking efforts when two groups compete for the allocation of a pure public good. Unlike with previous models, we measure the utility cost of rent-seeking in terms of the loss in private consumption confronting individuals when contributing to this activity. This allows us to escape from most of the neutrality results found in the literature, and to offer new and sensible results regarding the effect of group heterogeneity on rent-seeking efforts. Our model predicts that the total sum of rent-seekers and their between-group distribution do affect group success probabilities and aggregate rent-seeking efforts. Our model also predicts that it is possible to observe a poorer group being more successful than a richer group due to the former having a larger group-size. On the other hand, it shows that greater between-group wealth equality does not necessarily imply more aggregate rent-seeking efforts. The existence of group size asymmetries plays a key role in determining this effect.

Keywords: rent-seeking, public goods, group size, wealth inequality, group asymmetries

JEL Classification: D31, D70, D72, D74

Suggested Citation

Nupia, Oskar, Rent-Seeking for Public Goods: Group’s Size and Wealth Heterogeneity (July 8, 2011). Documento CEDE No. 2011-30, Available at SSRN: https://ssrn.com/abstract=1917622 or http://dx.doi.org/10.2139/ssrn.1917622

Oskar Nupia (Contact Author)

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

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