Technological Progress and Rent Seeking

33 Pages Posted: 27 Feb 2021 Last revised: 9 Mar 2022

See all articles by Vincent Glode

Vincent Glode

University of Pennsylvania - The Wharton School; University of Pennsylvania - Finance Department

Guillermo Ordoñez

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

Date Written: February 17, 2022

Abstract

We model firms' allocation of resources between surplus-creating (a.k.a., productive) and surplus-appropriating (a.k.a., rent-seeking) activities. We show that industry- or economy-wide technological progresses, such as the recent improvements in processing big data, induce a disproportionate and socially inefficient allocation of resources towards surplus appropriation, even when the associated productivity gains are far larger for surplus-creating activities than for surplus-appropriating activities. As technology improves, firms lean more on rent seeking to obtain their profits, endogenously reducing the impact of technological progress on economic progress and inflating the price of resources that are used for both types of activities.

Keywords: Resource Allocation, Big Data, Surplus Appropriation, Economic Growth.

JEL Classification: D21, D24, O33, O41

Suggested Citation

Glode, Vincent and Glode, Vincent and Ordoñez, Guillermo, Technological Progress and Rent Seeking (February 17, 2022). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper , 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

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
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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