Technological Progress and Rent Seeking
23 Pages Posted: 27 Feb 2021
Date Written: December 29, 2020
We model firms' optimal allocation of resources between surplus-creating (a.k.a., productive) activities and surplus-appropriating (a.k.a., rent-seeking) activities. We show that economy- or industry-wide technological progresses, such as the recent improvements in processing big data, induce a disproportionate and socially inefficient allocation of resources towards rent seeking. As technology improves, firms lean more on rent seeking to generate their profits, endogenously reducing the impact of technological progress on economic progress and inflating the price of resources that can either be used for rent seeking or production.
Keywords: Rent Seeking, Technology, Big Data, Imitation, Surplus Appropriation, Economic Growth
JEL Classification: D21, D24, O33, O41
Suggested Citation: Suggested Citation