growth miracles and failures in a markov switching classification model of growth abstract in this paper economic growth is interpreted as a sequence of transitions between distinct growth regimes that countries visit with different frequencies countries featuring similar growth dynamics are endogenously grouped into three different clusters the first cluster comprises successful countries that are characterized by lengthy periods of high or very high growth moderately successful countries in the second cluster experience both periods of reasonable growth and periods of stagnation whereas failing countries in the third cluster suffer from highly volatile growth rates with frequent episodes of crisis successful countries are characterized by better initial conditions policies and institutions compared to the other countries neither initial conditions nor institutions distinguish moderately successful from failing countries what makes them different is policy in the form of investments into infrastructure and human capital trade liberalization and limited policy volatility

the solution to the tullock rent seeking game when r 2 mixed strategy equilibria and mean dissipation rates in tullock s rent seeking model the probability a player wins the game depends on expenditures raised to the power r we show that a symmetric mixed strategy nash equilibrium exists when r 2 and that overdissipation of rents does not arise in any nash equilibrium we derive a tight lower bound on the level of rent dissipation that arises in a symmetric equilibrium when the strategy space is discrete and show that full rent dissipation occurs when the strategy space is continuous our results are shown to be consistent with recent experimental evidence on the dissipation of rents

rents dissipation and lost treasures comment in an interesting recent paper dari mattiacci and parisi 2005 extended tullock s 1980 rent seeking game with an entry decision the mixed strategies identified by dari mattiacci and parisi for the case of increasing returns in the contest success function r2 do not constitute an equilibrium of the game they study however these strategies are an equilibrium if the strategy space of the game is restricted by a minimum expenditure requirement and this minimum expenditure requirement is an element of a specific interval

efficient rents 2 free entry and efficient rent seeking in the competition for a monopoly right in which the number of bidders is fixed tullock and others have found the value of the resources spent in the aggregate to capture the transfer to be sometimes less than and sometimes greater than the value of the monopoly we think this approach to be incomplete since it leaves unanswered the question of what determines the number of individuals who will vie for the right to be the monopolist it is unsatisfactory to imagine for example that the franchisor sets the number of contestants one could then foresee that rent seeking would arise to influence the permissible number of bidders and this merely moves the rent seeking dissipation question one step back

the social costs of monopoly and regulation posner reconsidered focuses on social costs of monopoly and trade regulation in the united states benefit of marginal changes on antitrust activities equality of cost in obtaining monopoly and expected profit of monopolist elasticity of inputs in obtaining monopoly ebsco

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

free entry and efficient rent seeking this paper concerns rent seeking and the extent to which rents are dissipated under various circumstances gordon tullock s 1967 insight that expenditures made to capture an artificially created transfer represent a social waste suggested that the cost to the economy of monopoly and regulation is greater than the simple harberger 1954 deadweight loss indeed under tullock s original formulation and in the extensions of his work by krueger 1974 and posner 1975 rents are exactly dissipated at the social level 1 is spent to capture 1 so that the total welfare loss from such activities is equal to the harberger triangle plus the rectangle of monopoly profits

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

the incidence and persistence of corruption in economic development abstract economic development and bureaucratic corruption are determined jointly in a dynamic general equilibrium model of growth bribery and tax evasion corruption arises from the incentives of public and private agents to conspire in the concealment of information from the government these incentives depend on aggregate economic activity which in turn depends on the incidence of corruption the model produces multiple development regimes transition between which may or may not occur in accordance with recent empirical evidence the relationship between corruption and development is predicted to be negative

transfer seeking and avoidance on the full social costs of rent seeking we would like to thank gordon tullock and an anonymous referee of this journal for their helpful comments and suggestions this abstract was borrowed from another version of this item

multiple prize contests the optimal allocation of prizes abstract multiple prize contests are important in various fields of economics ranging from rent seeking over labour economics patent and r d races to tendering for governmental projects hence it is crucial to understand the incentive effects of multiple prizes on effort investment this survey attempts to outline compare and evaluate the results from the literature while a first prize always results in a positive incentive to invest effort second and later prizes lead to ambiguous effects depending on the objective function the characteristics of the individuals and the type of contest a different prize allocation is optimal

trade as a threshold variable for multiple regimes abstract this paper employs the data sorting method developed by hansen econometrica 68 2000 575 which allows the data to endogenously select regimes using different variables it is shown that openness as measured by the trade share to gdp is a threshold variable that can cluster middle income countries into two distinct regimes that obey different statistical models our result suggests that openness may not be as crucial in the growth process of low and high income countries but it is instrumental in identifying middle income countries into high and low growth groups

seeking rents by setting rents the political economy of rent seeking in recent years there has been a large number of papers on the subject of rent seeking most such works on rent seeking have taken the rent as exogenously determined by regulators regulators howeve r may also be expected and indeed have been shown to be rent seeke rs and hence the determination of the rent itself should be endogeniz ed to reflect the fact that the rent setters are themselves rent se ekers in this paper the authors do this by presenting an analysis o f the interaction of regulators firms and consumers within a rent s eeking framework where all three groups are assumed to be self motiva ted the analysis is carried out under alternative assumptions regard ing the nature of the market and the reaction functions of the partic ipants policy implications are drawn where appropriate copyright 1987 by royal economic society

collective rent dissipation the theory of rent seeking was initiated by tullock 1967 1980 followed by krueger 1974 and posner 1975 and more recently extended in various directions by allard 1988 appelbaum and katz 1986a b c gradstein and nitzan 1989 hillman and katz 1984 1987 hillman and samet 1987 hillman and riley 1989 katz et al 1990 long and vousden 1987 ursprung 1990 and varian 1989 the purpose of this paper is to extend this theory by introducing the possibility of collective group rent seeking with voluntary individual decisions regarding their extent of participation in the collective rent seeking efforts

risk averse rent seeking with shared rents this paper presents a nash equilibrium model of rent seeking behavior in which risk averse players expend resources to obtain a share of a rent as for example in contests for import quota licences results are obtained relating the equilibrium level of lobbying effort by each player to the value of the rent in particular reduced individual lobbying effort is associated with higher rents contested if players are sufficiently risk averse the question of whether the value of rents is a good measure of the resource cost of rent seeking is also considered a simple approximation involving risk and risk aversion parameters is derived for the proportion of rents dissipated in long run equilibrium risk and risk aversion are seen to reduce the rent dissipation ratio below unity copyright 1987 by royal economic society

participation in deterministic contests abstract this paper considers participation in deterministic contests for m 1 identical prizes which employ an auction like rule to determine the winners in most papers that investigate such models participation by precisely m 1 players is associated with players having complete information about their opponents characteristics and participation by more than m 1 players is associated with players having incomplete information about their opponents characteristics i show that incomplete information is in fact neither sufficient nor necessary for participation by more than m 1 players

classroom games rent seeking and the inefficiency of non market allocations economics is often taught at a level of abstraction that can hinder some students from gaining basic intuition however lecture and textbook presentations can be complemented with classroom exercises in which students make decisions and interact the approach can increase interest in and decrease skepticism about economic theory this feature offers short descriptions of classroom exercises for a variety of economics courses with something of an emphasis on the more popular undergraduate courses suggestions for future columns and comments on past ones should be sent to charles holt c o journal of economic perspectives department of economics university of virginia charlottesville virginia 22903 3288

the solow model with ces technology nonlinearities and parameter heterogeneity this paper examines whether nonlinearities in the aggregate production function can explain parameter heterogeneity in the solow growth regressions nonlinearities in the production technology are introduced by replacing the commonly used cobb douglas cd aggregated production specification with the more general constant elasticity of substitution ces specification we first justify our choice of production function by showing that cross country regressions favour the ces over the cd technology then by using an endogenous threshold methodology we show that the solow model with ces technology is consistent with the existence of multiple regimes copyright 2004 john wiley sons ltd

openness in services trade and economic growth abstract we examine the relationship between openness in services trade both telecommunication and financial and economic growth via the threshold regression model to test for a differential impact between low and high income countries results confirm the existence of a two regime split

long run equilibrium and total expenditures in rent seeking a comment although corcoran is mathematically correct i believe his comment is not very helpful in order to discuss the matter in some detail the reader should consult table 7 1 from my original efficient rent seeking reproduced on page 92 1 this shows the equilibrium investment of each individual different numbers of individuals playing the game n and differing values of r table 7 2 also reproduced on page 93 shows the total investment

efficient rents 1 rent seeking behavior in the long run we have analyzed long run behavior in rent seeking under several conditions and behavioral hypotheses the question of interest is whether or not the long run expenditures will exactly equal the value of the rents our results depend on the type of competitive response which is assumed to exist in the long run and on the r value governing the probability of winning

risk averse rent seekers and the social cost of monopoly power there is now quite general recognition that the social cost of monopoly power encompasses the resources expended by individuals seeking to become the beneficiaries of monopoly rents however since the activity of rent seeking is generally not observable direct estimates of resources expended in quests to acquire monopoly power are usually impossible to come by 1 as a consequence the indirect approach of taking the observed value of monopoly rents as indicative of the unobserved value of the resources expended in rent seeking is quite generally adopted in approaches to evaluation of the social cost of such activity

distribution and development in a model of misgovernance abstract this paper presents an analysis of bureaucratic corruption income inequality and economic development the analysis is based on a dynamic general equilibrium model in which bureaucrats are appointed by the government to implement a redistributive programme of taxes and subsidies designed to benefit the poor corruption is reflected in bribery and tax evasion as bureaucrats conspire with the rich in providing false information to the government in accordance with empirical evidence the model predicts a positive relationship between corruption and inequality and a negative relationship between corruption and development

long run equilibrium and total expenditures in rent seeking the lure of excess profits or rents associated with monopoly power gives rise to expenditures to obtain these rents competitive rent seeking behavior is recognized as a factor which must be included among the wastes associated with monopoly power tullock 1967 posner 1975 1 the expenditures are aimed at transferring wealth rather than its creation and the use of resources to obtain this transfer is a loss to society how important rent seeking is as a part of the total monopolistic waste hinges on the size of the total expenditures induced by a given level of excess profits

rent seeking with non identical sharing rules the primary object of this paper is to examine the role of differential sharing rules within a collective rent seeking setting on the possible non existence of nash equilibrium focusing on groups that distribute part of the rent equally among their members and the residual according to relative effort we show that in rent seeking societies applying the two polar sharing rules equilibrium never exists in the general case where groups apply different but not necessarily the polar sharing rules we study the relationship between group variability in distributing rents and the problem of non existence of equilibrium in the rent seeking game

coasean bargaining in the presence of pigouvian taxation coasean arguments against the pigouvian perspective are well established a central tenet in this criticism argues that a pigouvian tax may be a source of inefficiency if parties were to bargain in the presence of a pigouvian tax allocative inefficiencies would occur the so called buchanan stubblebine turvey theorem by analyzing a coasean environment where the appropriation of property rights is costly we show coasean bargaining in the presence of a pre existing pigouvian tax may be superior this has implications for policy where dual regulatory environments exist such as regulation at the state and federal level as well as environmental liability and litigation

the welfare consequences of directly unproductive profit seeking dup lobbying activities price versus quantity distortions abstract this paper is a contribution to the growing literature on the theory of what bhagwati 1982 has christened the theory of dup activities these are activities that use up real resources in making profits i e income without producing directly or indirectly a good they result therefore in the contraction of the availability set defined on goods for one generic subset of such dup activities namely distortion triggered lobbying activities the paper establishes asymmetrical propositions on the possibility of such dup lobbying resulting in a paradoxical improvement of welfare

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

alternative australian climate change plans the public s views climate change has come to the forefront of australian politics and there is now an active on going policy debate about how to best reach a commonly agreed long term goal this paper looks at five major dimensions of this debate and constructs policy options based on them a discrete choice experiment approach was used with a representative sample from a major internet panel provider survey respondents made choices between pairs of policy options with different characteristics they favored policies starting in 2010 rather than 2012 and spending 20 of revenue raised on energy related r d they were almost evenly split on whether the plan should initially exempt the transport sector and two competing approaches that redistribute revenue from the plan and they opposed plans giving special treatment to energy intensive sectors of the economy a number of other policy relevant questions related to understanding australian views and knowledge related to climate change also were asked

do all countries grow alike abstract this paper investigates the driving forces of output change in 77 countries during the period 1970 2000 a flexible modeling strategy is adopted that accounts for i the inefficient use of resources and ii different production technologies across countries the proposed model can identify technical efficiency and input change for each of three endogenously determined regimes membership in these regimes is estimated rather than determined ex ante this framework enables explorations into the determinants of output growth and convergence issues in each regime

on the output effects of barriers to trade we study the macroeconomic effects of international trade policy by integrating a hecksher ohlin trade model into an optimal growth framework the model predicts that a more open economy will have higher factor productivity furthermore there is a selective development trap to which countries may or may not converge depending on policy income at the development trap falls as trade barriers increase hence cross country differences in barriers to trade may help explain the dispersion of per capita income observed across countries the effects are quantified and we show that protectionism can explain a relevant fraction of tfp and long run income differentials across countries we study the effects of international trade policy on output to do so we analyze a standard neoclassical growth model where countries can trade intermediate goods the markets of these goods are structured as in the also standard hecksher ohlin trade model thus trade happens owing to comparative advantage which emerges from differences in factor endowments across countries 2 we focus on the case of a small price taking economy one can solve for equilibrium sequentially first each period s output and trade can be treated as a static problem and its solution can be summarized by a mapping from capital and labor to the output of the final good then using that endogenous mapping as if it were an exogenous production function one can solve the intertemporal decisions of agents in the economy in that way a potentially complex dynamic trade problem is avoided it turns out that the equilibrium mapping linking inputs and final output is affected by tariffs as the gains from trade impact not only welfare but also the availability and price of intermediate inputs and hence productivity

macroeconomic stability and the distribution of growth rates it is often argued that macroeconomic instability can form a binding constraint on economic growth drawing on a new index of stability threshold estimation is used to divide developing economies into two growth regimes depending on a threshold level of stability for the more stable group of countries the output benefits of investment are greater conditional convergence is faster and measures of institutional quality have more explanatory power suggesting that instability forms a binding constraint for the less stable group macroeconomic stability is also shown to dominate several other candidates for identifying distinct growth regimes

public policies pressure groups and dead weight costs abstract this paper presents a model of competition among special interest groups for political influence each active group exerts pressure to affect its taxes and subsidies where activities of different groups are related by the equality between total tax collections and total tax subsidies the dead weight costs and benefits of taxes and subsidies play a major role in our model an increase in the dead weight cost of taxation encourages pressure by taxpayers while an increase in the dead weight costs of subsidies discourages pressure by recipients various applications of the analysis are discussed