Political incentives for rent creation

Randall Holcombe

Constitutional Political Economy, 2017, vol. 28, issue 1, No 5, 62-78

Abstract: Abstract Rent-seeking is often depicted as a contest in which rent-seekers compete for a prize—the rent. In the process of rent-seeking, much or perhaps all of the rent is dissipated through the costs the contestants incur to compete. Rent dissipation is inconsistent with the incentives of both the rent-seekers and those who create the rents. Policymakers have an incentive to create rents only if they gain from the process, and their gain comes from sharing any surplus that goes to those who obtain the rents. A surplus can be created through a barrier to entry into rent-seeking. When institutions that generate barriers to entry into rent-seeking break down, rent-seeking competitions can occur in which all rents are dissipated, but this should be a special case rather than the general rule in rent-seeking.

Keywords: Rent seeking; Rent dissipation; Transitional gains; Rent extraction; Elite theory (search for similar items in EconPapers)
JEL-codes: D02 D72 H11 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s10602-016-9228-4

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