Technological Progress and Rent Seeking

37 Pages Posted: 27 Feb 2021 Last revised: 14 Jun 2022

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: June 13, 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-wide technological advancements, such as recent progress in the collection and processing of 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 the resources used for both types of activities.

Keywords: Resource Allocation, Surplus Appropriation, Misallocation, Economic Growth, Imitation, Speculation.

JEL Classification: D21, D24, O33, O41

Suggested Citation

Glode, Vincent and Ordoñez, Guillermo, Technological Progress and Rent Seeking (June 13, 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

HOME PAGE: http://www.vincentglode.com

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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