On Adverse Selection of Technologies

Matthias Kräkel

Journal of Institutional and Theoretical Economics (JITE), 2008, vol. 164, issue 2, 343-355

Abstract: This paper discusses the interrelation between the choice of technology and rent seeking. First, the players have to decide on the purchase of a technology. If the technology is acquired, realized profits are distributed via a rent-seeking contest. I can show that players will reject profitable technologies ("adverse selection") or underinvest, if they anticipate excessive rent seeking. The results are applied to the empirical findings on differences in income and total factor productivity across countries. These findings can be explained if developing countries are more prone to rent seeking than industrial ones due to their less stable property-rights structures.

JEL-codes: D24 D74 O12 O33 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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