Rethinking rent seeking for technological change and development

Abstract

The analysis of rents and rent-seeking is highly relevant for evolutionary economics but it has received little attention. This paper surveys the recent literature on technological change, rents, and rent-seeking applied to economic development. Economic development requires developing countries to upgrade technologically while coping with pervasive rent-seeking activities. We assess these issues in turn. This paper first surveys the literature on technical learning and institutional change due to the adoption and adaptation of new technology. Next, the debate on rents and rent-seeking, especially in relation to the issue of technological change in the process of development, is presented. Finally, we assess the roles of the state in solving the critical constraints faced by firms and industries. This paper asserts that the processes of development and industrial upgrading require understanding the mechanisms of rent management—a configuration of incentives and pressures that fully correspond to the existing political, institutional, and industrial structures of a developing country. The rent management analysis emphasizes the diversity of empirical contexts across and within countries.