| Abstract: | This paper offers an explanation of the fact that some foreign firms are favored at the expense of others, and characterizes the distribution of favors in terms of the cost parameters of firms. We present a model where favors must be bought: they come from competing contributions. This model is compared with a benchmark model with a benevolent government. We show how the distribution of favors in the favor‐seeking model deviates from the distribution that would be obtained if the government were really benevolent. |
