Economic Inequality Exacerbated by Economic Rents from Exploitative Contracting

Taiji Harashima

MPRA Paper from University Library of Munich, Germany

Abstract: According to contract theory, exploitative contracting probably exists widely and on a large scale, and it generates economic rents. In this paper, I show that the origin of these economic rents is heterogeneity in fluid intelligences, and heterogeneity in honesty aggravates the situation. Even without asymmetric information and irrationality, and even if economic agents have no malicious intent and are always honest, economic rents from mistakes in business deals are generated. Some households or family lines persistently obtain these economic rents with higher probability than others, and, as a result, extreme economic inequality will be generated. This means that there is a built-in mechanism such that the level of economic inequality in an economy is naturally exacerbated. Hence, a government has to intervene in economic activities to eliminate the negative effects of these economic rents by appropriately redistributing incomes among households.

Keywords: Contract; Economic rents; Exploitative contracting; Fluid intelligence; Inequality (search for similar items in EconPapers)
JEL-codes: D33 D63 D86 E25 H23 (search for similar items in EconPapers)
Date: 2020-11-18
New Economics Papers: this item is included in nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/104178/1/MPRA_paper_104178.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104178

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().