Rent-seeking and reorganisation of administrative units

Gopakumar Achuthankutty (), Ayushi Choudhary () and Rupyan Pal ()
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Gopakumar Achuthankutty: Indira Gandhi Institute of Development Research
Ayushi Choudhary: Indira Gandhi Institute of Development Research
Rupyan Pal: Indira Gandhi Institute of Development Research

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: We examine whether rent-seeking incentives shape a central planner's decision to reorganise administrative units. In a two-stage group contest, risk-neutral administrative units compete for shares of a perfectly divisible public fund, with inter-unit and intra-unit contests occurring in Stages 1 and 2, respectively. We identify the conditions under which the planner prefers reorganisation and analyse its impact on aggregate and stage-wise rent accumulation. We show that total rent accumulation depends on the interplay between changes in fractionalisation, population inequality, and the scale effect from changes in the total population of active units following a reorganisation. While a proliferatory reorganisation (i.e., increasing the number of administrative units), when all administrative units remain active, increases the planner's rent accumulation, it can overturn the loss in social welfare under certain conditions. Furthermore, when some units become inactive, then under mild conditions on population changes, this outcome persists if the reorganisation is effectively expansive.

Keywords: Rent-seeking; Administrative unit reorganisation; Contest theory; Fractionalisation; Population inequality (search for similar items in EconPapers)
JEL-codes: C72 D72 H73 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2025-07
New Economics Papers: this item is included in nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2025-019

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