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Public Choice

, Volume 133, Issue 1–2, pp 199–229 | Cite as

Crowding-out in productive and redistributive rent-seeking

  • Giuseppe Dari-Mattiacci
  • Eric Langlais
  • Bruno Lovat
  • Francesco Parisi
Open Access
Article

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 

JEL

C72 D72 K00 

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Copyright information

© Springer Science+Business Media, BV 2007

Authors and Affiliations

  • Giuseppe Dari-Mattiacci
    • 1
    • 2
  • Eric Langlais
    • 3
  • Bruno Lovat
    • 4
  • Francesco Parisi
    • 5
  1. 1.Amsterdam Center for Law and Economics and Tinbergen InstituteUniversity of AmsterdamAmsterdamThe Netherlands
  2. 2.George Mason UniversitySchool of LawArlingtonUSA
  3. 3.UFR Administration Economique et SocialeBETA, CNRS et Université Nancy 2NancyFrance
  4. 4.Faculté de Droit, Economie et GestionBETA, CNRS et Université Nancy 2NancyFrance
  5. 5.School of LawUniversity of MinnesotaMinneapolisUSA

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