Technological Progress and Rent Seeking

23 Pages Posted: 27 Feb 2021

See all articles by Vincent Glode

Vincent Glode

University of Pennsylvania - The Wharton School

Guillermo Ordoñez

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 29, 2020

Abstract

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

Glode, Vincent and Ordoñez, Guillermo, Technological Progress and Rent Seeking (December 29, 2020). Available at SSRN: https://ssrn.com/abstract=3753042 or http://dx.doi.org/10.2139/ssrn.3753042

Vincent Glode (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Guillermo Ordoñez

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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