Rent Seeking/Corruption And Growth: A Simple Model
George-Marios Angeletos () and
Tryphon Kollintzas ()
No 2464, CEPR Discussion Papers from C.E.P.R. Discussion Papers
The goal of this paper is to propose a simple paradigm for understanding rent seeking and corruption in the growth context. We develop an endogenous growth model where entrepreneurs, as intermediate-good producers, may engage in rent-seeking activities. The latter are defined by the following properties: (i) their internal effect is positive; (ii) their external effect is negative; and (iii) they use real resources. Our formulation may be viewed as a parable for theft and fraud; organized crime; industrial espionage; lobbying and policy influence; misgovernance, institutional inefficiency, tax evasion, etc. The economy is shown to fall into a trap of high rent seeking/corruption and low growth. Agents' perceptions about the external effects of rent seeking, and the complementarity or substitutability of intermediate inputs, are crucial. Contrary to conventional wisdom, higher returns to capital and more competition can be detrimental for welfare and growth, as they induce more rent seeking/corruption. Finally, our paradigm yields insights into the relationship of R&D, politicoeconomic equilibrium, income distribution, and growth, as well as the design of tax/growth policies in the presence of rent seeking/corruption.
Keywords: Corruption; Growth; Property Rights; Rent Seeking (search for similar items in EconPapers)
JEL-codes: E10 H20 O10 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:2464
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=2464
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().