Introducing an Index of Rent Seeking: A Synthetic Matching Approach

Abstract

Despite Gordon Tullock’s famous effort to motivate researchers to quantify investments in rent seeking, the empirical measurement of rent-seeking activity remains under-studied. This paper proposes a new estimate of rent seeking by comparing the industrial composition of MSAs that contain a state capital with those of a comparable synthetic match. Each of these synthetic matches are constructed as a weighted average of all MSAs that do not contain a state capital, where the weights are chosen via entropy balancing. This paper offers the first panel estimate of rent seeking in the United States by state and year for the years 2004-2020. We also provide the first industry-specific measures of rent seeking, in addition to aggregate indexes of traditional, in-kind, indirect, and total rent seeking. All measures of rent seeking described in this paper have been made publicly available.

Keywords: Rent Seeking, Lobbying, Corruption

JEL Classification: D72, H70, C13