The Political Economy of Rent-Seeking Behavior and the Connection with Unearned Income and Inequality

Abstract

For decades, inequality has been one of the most important problems to be tackled, and studies of income (or wealth) inequality are the source of much research. When we deal with the sources of unequal income distribution, and if a factor is unproductive but only reasonable in the accumulation of wealth, it has a diverting impact on income. In this line, rent-seeking activities are a structure suitable for this content. Rent-seeking is aimed at gaining without contributing to the number of goods and services and shows the characteristic of unearned income. Earned income is paid for the labor from physical and mental activities. Unearned income does not have this feature and is a return on income due to investment in income. According to Stiglitz (2016), rent-seeking is a struggle to get a larger share of wealth. Taking larger shares is linked to declining shares and leads to inequality within society. In the context of the political economy of rent-seeking behavior, we examine various approaches. In addition, we illustrate how rent-seeking is related to unearned income and inequality.