Working Paper: CEPR ID: DP5893
Authors: Johan NM Lagerlf
Abstract: I develop a model of rent seeking with informational foundations and an arbitrary number of rent seekers, and I compare the results with Tullock's (1980) classic model where the influence activities are "black-boxed." Given the microfoundations, the welfare consequences of rent seeking can be studied. In particular, I show that competition among rent seekers can be socially beneficial, since the additional information that the decision maker gets access to makes the increase in rent-seeking expenditures worthwhile. However, the analysis also highlights a logic that, under natural parameter assumptions, makes the rent seekers spend more resources on rent seeking than is in society's interest, which is consistent with the spirit of the rent-seeking literature.
Keywords: competition; disclosure; information acquisition; rent seeking; welfare
JEL Codes: D42; D43; D72; D83; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased competition (L13) | enhanced information acquisition (D83) |
| enhanced information acquisition (D83) | social welfare (I38) |
| increased competition (L13) | social welfare (I38) |
| increased expenditures (H59) | social welfare (I38) |