Crowding-out in productive and redistributive rent-seeking

Giuseppe Dari-Mattiacci, Eric Langlais (), Bruno Lovat and Francesco Parisi
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Giuseppe Dari-Mattiacci: ACLE - Amsterdam Center for Law & Economics - UvA - Universiteit van Amsterdam = University of Amsterdam
Eric Langlais: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Bruno Lovat: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Francesco Parisi: School of Law, University of Minnesota

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Abstract: This paper presents a general rent-seeking model in which participants decide on entry before choosing their levels of efforts. The conventional wisdom in the rent-seeking literature suggests that the rent dissipation increases with the number of potential participants and with their productivity of effort. In this paper, we show that this result of the rent-seeking literature is far from general and applies only when participants are relatively weak and enter the game with certainty. In the presence of strong competitors, the expected total dissipation actually decreases, since participation in the game is less frequent. We further consider the impact of competitors' exit option, distinguishing between "redistributive rent-seeking" and "productive rent-seeking" situations. In redistributive rent-seeking, no social loss results from the fact that all competitors exit the race. In productive rent-seeking, instead, lack of participation creates a social loss (the "lost treasure" effect), since valuable rents are left unexploited. We show that the lost-treasure effect perfectly counterbalances the reduction in rent dissipation due to competitors' exit. Hence, unlike redistributive rent-seeking, in productive rent-seeking the total social loss remains equal to the entire rent even when parties grow stronger or the number of players increases.

Keywords: Rent-seeking; Rent dissipation; Tullock’s paradox (search for similar items in EconPapers)
Date: 2007-06-14
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Published in Public Choice, 2007, 133 (1-2), pp.199-229. ⟨10.1007/s11127-007-9186-5⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05511104

DOI: 10.1007/s11127-007-9186-5

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