Rent-seeking competition from state coffers in Greece: a calibrated DSGE model

Konstantinos Angelopoulos, Sophia Dimeli, Apostolis Philippopoulos and Vanghelis Vassilatos ()
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Konstantinos Angelopoulos: University of Glasgow
Sophia Dimeli: Athens University of Economics and Business
Apostolis Philippopoulos: Athens University of Economics and Business, University of Glasgow and Visiting Scholar at the Bank of Greece

No 120, Working Papers from Bank of Greece

Abstract: We incorporate an uncoordinated redistributive struggle for extra fiscal privileges and favors into an otherwise standard dynamic stochastic general equilibrium model. Our aim is to quantify the extent of rent seeking and its macroeconomic implications. The model is calibrated to Greek quarterly data over 1961:1-2005:4. Our work is motivated by the rich and distorting tax-spending system in Greece, as well as the common belief that interest groups compete with each other for fiscal privileges at the expense of the general public interest. We find that (i) the introduction of rent seeking moves the model in the right direction vis-à-vis the data (ii) an important fraction of GDP is extracted by rent seekers (iii) there can be substantial welfare gains from reducing rent seeking activities.

Keywords: Fiscal policy; rent seeking; welfare (search for similar items in EconPapers)
JEL-codes: E32 E62 O17 (search for similar items in EconPapers)
Pages: 44
Date: 2010-11
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:120

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