The Response to Reform in a Growing Economy: The Role of the Rent-Seeking Technology
REVIEW OF DEVELOPMENT ECONOMICS, DE #7016, January 31, 1998
Posted: 26 Mar 1998
Individuals engaged in rent seeking accumulate sector specific human capital through learning-by-doing. If agents specialize, small reforms of the trade regime may fail to reduce the level of the rent-seeking activity. The size of the reform necessary to induce movement out of rent seeking is increasing in the time that controls have been in place. If rent seeking and production are complementary activities, agents will not specialize in either, and will fully respond to a small reform of the trade regime. This is true even though they accumulate human capital specific to rent seeking.
JEL Classification: F1, O1
Suggested Citation: Suggested Citation