Rent seeking and the excess burden of taxation

Nava Kahana and Doron Klunover

European Journal of Political Economy, 2014, vol. 35, issue C, 158-167

Abstract: The social costs of rent seeking and the excess burden of taxation have been studied and evaluated independently. We show that, when rent seekers earn taxable income, there is interdependence between the two types of social losses. Rent seeking increases the excess burden of taxation under risk neutrality when leisure is non-inferior. We derive a condition for rent seeking to increase the excess burden of taxation under risk aversion. When rent seekers can earn taxable income, rent seeking is more socially costly than is inferred from contest models alone, because of an increased excess burden of taxation.

Keywords: Rent seeking; Excess burden of taxation; Welfare cost of taxation; Size of government (search for similar items in EconPapers)
JEL-codes: H2 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:35:y:2014:i:c:p:158-167

DOI: 10.1016/j.ejpoleco.2014.06.003

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