Rent Seeking: The Social Cost of Contestable Benefits

52 Pages Posted: 7 Jun 2017

See all articles by Arye L. Hillman

Arye L. Hillman

Bar-Ilan University - Department of Economics; Centre for Economic Policy Research (CEPR)

Ngo Van Long

McGill University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 04, 2017

Abstract

A major contribution of the public-choice school is the recognition by Gordon Tullock that contestable rents give rise to social losses because of unproductive resource use. Contestable rents usually are politically assigned privileges. Contestable rents can also be found outside of government decisions. We describe the example of rents in academia in different cultures. The primary empirical question regarding rent seeking concerns the magnitude of the social loss from the contesting of rents. Direct measurement is impeded by lack of data and indeed denial that rent seeking took place. Contest models provide guidance regarding social losses. We provide a generalized contest model. Social losses from rent seeking are diminished in high-income democracies because rent seeking usually takes place by groups seeking ‘public good’ benefits. Rents are also less visible in democracies, because political accountability requires that rents be assigned in indirect non-transparent ways. These restraints are not present in autocracies, where rent seeking is also facilitated by corruption and by the need to influence a smaller number of decision makers. Ideology can influence whether rent seeking is recognized to exist.

Keywords: rent seeking, contests, political discretion, academic merit, ideology, political correctness

JEL Classification: H000

Suggested Citation

Hillman, Arye L. and Van Long, Ngo, Rent Seeking: The Social Cost of Contestable Benefits (May 04, 2017). CESifo Working Paper Series No. 6462, Available at SSRN: https://ssrn.com/abstract=2981506

Arye L. Hillman (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+97 29 774 6424 (Phone)
+97 29 771 5628 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ngo Van Long

McGill University - Department of Economics ( email )

855 Sherbrooke Street West
Montreal, QC H3A 2T7
Canada
514-398-4850 (Phone)
514-398-4938 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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