Rent‐Seeking, Market Structure, and Growth

24 Pages Posted: 20 Jun 2013

See all articles by Daniel Brou

Daniel Brou

University of Western Ontario

Michele Ruta

Economic Research Division, WTO; Columbia Business School - Economics Department; International Monetary Fund (IMF)

Date Written: July 2013

Abstract

We study the role of productive and unproductive entrepreneurship in economic growth, in a setting where firms compete in both economic and political markets. Specifically, firms compete for market share through cost‐reducing technological innovation, and they vie for influence over government transfer policy through rent‐seeking activities. We find that rent‐seeking affects growth in two ways: it allows firms to ignore economic competition, leading to less innovation, and it alters the number of firms that are supported in equilibrium. The former effect is negative, while the latter is ambiguous. We show how these effects depend on various characteristics of economic and political markets.

Keywords: Economic growth, entrepreneurship, political economy, R&D, welfare

JEL Classification: D72, L13, O31

Suggested Citation

Brou, Daniel and Ruta, Michele, Rent‐Seeking, Market Structure, and Growth (July 2013). The Scandinavian Journal of Economics, Vol. 115, Issue 3, pp. 878-901, 2013. Available at SSRN: https://ssrn.com/abstract=2282336 or http://dx.doi.org/10.1111/sjoe.12014

Daniel Brou (Contact Author)

University of Western Ontario ( email )

London, Ontario N6A 5B8
Canada
519-661-2111 x84815 (Phone)

HOME PAGE: http://publish.uwo.ca/~dbrou/

Michele Ruta

Economic Research Division, WTO ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland

HOME PAGE: http://www.iue.it/Personal/Fellows/MicheleRuta/Welcome.htm

Columbia Business School - Economics Department ( email )

420 West 118th Street
New York, NY 10027
United States

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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