Two Differential Games Between Rent-Seeking Politicians and Capitalists: Implications for Economic Growth

Darong Dai (), Wenzheng Gao () and Guoqiang Tian
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Wenzheng Gao: ��School of Economics, Nankai University, Tianjin 300071, P. R. China

International Game Theory Review (IGTR), 2019, vol. 21, issue 03, 1-30

Abstract: We comparatively study two differential games between politicians and capitalists in terms of reducing rent-seeking distortions and stimulating economic growth. These two games imply two relationships — top-down authority and rational cooperation — between politicians and capitalists. In the current context, we prove that cooperation leads to faster growth than does authority, and simultaneously satisfies individual rationality, group rationality, Pareto efficiency and sub-game consistency. We thus show that setting a bargaining table between capitalists and politicians may create desirable incentives for reducing rent-seeking distortions, developing the spirit of capitalism and stimulating economic growth.

Keywords: Rent-seeking politicians; stochastic differential game; capital income tax; endogenous growth (search for similar items in EconPapers)
JEL-codes: C70 O43 P50 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S0219198918500111

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