Title

Policy making and rent-dissipation: An experimental test

Authors

Authors

D. S. Bullock;E. E. Rutstrom

Comments

Authors: contact us about adding a copy of your work at STARS@ucf.edu

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

Share

COinS