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Policy making and rent-dissipation: An experimental test

David Bullock () and E. Rutström ()

Experimental Economics, 2007, vol. 10, issue 1, 36 pages

Abstract: We present a transfer-seeking model of political economy that links the theory of Becker (1983) with Tullock-type models of politically contestable rents. In our model the size of the transfer is determined endogenously, and over-dissipation of rents is predicted even under conditions of risk-neutrality and perfect rationality. We implement an empirical test of this model by collecting behavioral data in a laboratory experiment. We confirm the existence of behavior that leads to over-dissipation of rents in games with both symmetric and asymmetric political power. To the extent that the transfer-seeking costs are social costs, our findings imply that the total costs of running government might be greatly underestimated if the value of the rent is used as a proxy for the rent-seeking cost. We also confirm the hypotheses that lowering the political power of one player can lead to smaller rent-seeking expenditures and to larger transfers Copyright Economic Science Association 2007

Keywords: Rent-dissipation; Rent-seeking; Transfers; Experimental economics (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1007/s10683-006-9133-1

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