Policy making and rent-dissipation: An experimental test

    Authors

    D. S. Bullock;E. E. Rutstrom

    Comments

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    Abbreviated Journal Title

    Exp. Econ.

    Keywords

    rent-dissipation; rent-seeking; transfers; experimental economics; MIXED-STRATEGY EQUILIBRIA; POLITICAL-ECONOMY; PRISONERS-DILEMMA; PRESSURE GROUPS; SEEKING; GAMES; COOPERATION; BEHAVIOR; Economics

    Abstract

    We present a transfer-seeking model of political economy that links the theory of Becker (1983) with Tullock-type models of politically contestable rents. In our model the size of the transfer is determined endogenously, and over-dissipation of rents is predicted even under conditions of risk-neutrality and perfect rationality. We implement an empirical test of this model by collecting behavioral data in a laboratory experiment. We confirm the existence of behavior that leads to over-dissipation of rents in games with both symmetric and asymmetric political power. To the extent that the transfer-seeking costs are social costs, our findings imply that the total costs of running government might be greatly underestimated if the value of the rent is used as a proxy for the rent-seeking cost. We also confirm the hypotheses that lowering the political power of one player can lead to smaller rent-seeking expenditures and to larger transfers.

    Journal Title

    Experimental Economics

    Volume

    10

    Issue/Number

    1

    Publication Date

    1-1-2007

    Document Type

    Article

    Language

    English

    First Page

    21

    Last Page

    36

    WOS Identifier

    WOS:000245294200003

    ISSN

    1386-4157

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