The ٍ Effect of Property Rights on Rent-seeking in Selected OPEC and OECD Countries

Abstract

Rent-seeking is a non-productive activity and is formed mostly following government intervention in the economy. In rent-seeking activities, resources and efforts are spent on achieving a monopoly position, and instead of being provided with productive activities, it is spent on distributive struggles that in the long run change the structure of economic and social incentives and lead to heavy welfare losses and heavy social costs. Therefore, identifying the factors affecting Rent-seeking helps us to reduce it and achieve economic growth. Property rights is one of the influential institutional variable that effect on rent-seeking. Property rights affect the motivation of individuals and the use of resources and can encourage productive activities such as the accumulation of skills, the development of new products and the creation of production technology, or can lead people to addictive, corrupt and crime behaviors. In countries where private property rights are well defined and enforced, the legal rights of investors are protected and investors are more willing to invest in financial institutions and the financial market flourishes. But if property rights are not well defined and enforced, people's motivation is distorted, people turn to rent-seeking, and their motivation to participate in productive work is greatly reduced.Due to the importance of property rights in the formation of rent-seeking, in this study, this issue is examined in addition to the impact of other variables such as education , democracy, economic growth, militarization, inflation and oil rent on rent-seeking. For this purpose, two groups selected member countries of the Organization of the Petroleum Exporting Countries (OPEC) and the Organization for Economic Cooperation and Development (OECD) have been studied from 1996 to 2017. To achieve this goal, a panel data model has been used. First, with the Hadri-Rao test, which considers structural breaks, the stationarity of the data was investigated, pre-estimation tests were performed, and then due to cross-sectional dependency, variance heterogeneity and autocorrelation between the residual errors in each selected Organization of the Petroleum Exporting Countries (OPEC) countries and selected member countries of the Organization for Economic Co-operation and Development (OECD) are estimated by the Driscoll-Cray method. The results show that in both groups, democracy and property rights and economic growth have a significant negative impact, both inflation and militarization has a positive and significant effect on rent-seeking. Also in the selected member countries of the Organization for Economic Co-operation and Development, the rent-seeking decreases as the state of education improves. However, this variable has a significant and positive effect on the rent-seeking in oil-exporting countries. On the other hand, in oil-exporting countries, oil rent have a positive and significant effect on rent-seeking, when oil rent increase, people have less motivation to do productive work and they do more distributive activities.