Rent‐Seeking,Market Structure,and Growth |
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Authors: | Daniel Brou Michele Ruta |
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Affiliation: | 1. University of Western Ontario, , London, ON N6A 5C2 Canada;2. World Trade Organization, , CH‐1211 Geneva 21, Switzerland |
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Abstract: | We study the role of productive and unproductive entrepreneurship in economic growth, in a setting where firms compete in both economic and political markets. Specifically, firms compete for market share through cost‐reducing technological innovation, and they vie for influence over government transfer policy through rent‐seeking activities. We find that rent‐seeking affects growth in two ways: it allows firms to ignore economic competition, leading to less innovation, and it alters the number of firms that are supported in equilibrium. The former effect is negative, while the latter is ambiguous. We show how these effects depend on various characteristics of economic and political markets. |
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Keywords: | Economic growth entrepreneurship political economy R&D welfare D72 L13 O31 |
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