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Companion to the Political Economy of Rent Seeking

Companion to the Political Economy of Rent Seeking

Edited by Roger D. Congleton and Arye L. Hillman

The quest for benefit from existing wealth or by seeking privileged benefit through influence over policy is known as rent seeking. Much rent seeking activity involves government and political decisions and is therefore in the domain of political economy, although it can also take place in personal relations and within firms and bureaucracies. Rent seeking, which involves the unproductive use of resources, is however primarily associated with policies that create rents as well as rent extraction or political benefit for the creators of rents. The contributions in this outstanding volume provide an accompaniment or “companion” to the literature on rent seeking and the related political economy of rent creation and extraction. The chapters, written by leading scholars in the field, demonstrate the centrality of rent-related incentives to the study of economics, politics, culture, public administration and history.

Chapter 14: Rent seeking and the resource curse

Robert T. Deacon and Ashwin Rode

Subjects: economics and finance, political economy, public choice theory, politics and public policy, political economy, public choice


Many countries receiving natural resource windfalls have had slow growth, low incomes and weak political institutions, an empirical regularity named the resource curse. Patterns in the data suggest a political link: a curse is most likely for countries that have weak institutions initially and for resources that are spatially concentrated. Rent seeking for a resource prize is a prominent theme in theoretical explanations. There is extensive evidence supporting both the curse and a political transmission channel. Three aspects of this chapter are particularly important for rent seeking: (1) political theories of the resource curse consistently predict over-dissipation, a finding at odds with ex ante predictions of rent-seeking rational Nash behavior; (2) variations in pre-windfall political institutions can magnify, moderate or overturn the resource curse; and (3) a resource windfall can alter the quality of political institutions.

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