Effects Of Rent Seeking Research Articles

Transaction-based government-business relationship via government customer

Transaction-based government-business relationship (GBR) can be established when the government serves as a company's customer. This study investigates the consequences and mechanisms of this type of GBR. We find that companies with government customers receive more subsidies, due to both signalling effect and rent-seeking effect. As China's anti-corruption campaign tries to disconnect relation-based GBR and eliminate rent-seeking, transaction-based GBR survives. In the post anti-corruption campaign period, the rent-seeking effect of the transaction-based GBR weakens, but the signalling effect remains, and the government subsidy efficiency improves. This study sheds lights on the economics of transaction-based GBR which is largely ignored in the existing literature and reveals the effects of the interactions of anti-corruption and business transactions.

Tax Incentives, Tax Enforcement, and Enterprise R&D Investment: Evidence From Chinese A-Share Listed.

This study investigates the relationship between tax incentives, tax enforcement, and R&D investment in Chinese enterprises. Tax compliance is an important part of organizational behavioral psychology, which will impact organizational innovation activities. Therefore, the present study utilizes the panel data of Chinese A-share listed companies collected from the China Stock Market & Accounting Research (CSMAR) database from 2011 to 2020 to conduct empirical research. It tests the policy effect of tax incentives on enterprise R&D investment and examines the impact of tax enforcement on enterprise R&D behavior and its moderating effect on the relationship between tax incentives and enterprise R&D investment. The results show that China’s preferential tax policies positively affect enterprise innovation activities, and stable and continuous tax incentives can stimulate enterprises to increase R&D investment. Increasing the intensity of tax enforcement has a significant positive impact on enterprise R&D investment, which means that the promotion effect of “governance effect” and “incentive effect” caused by tax enforcement may exceed the negative impact brought by its “taxation effect” and “rent-seeking effect.” The study suggests that with the strengthening of tax enforcement, the promotion effect of tax incentives is weakened, which is only reflected in non-state-owned enterprises. Finally, we propose relevant policy recommendations based on the research results. This includes further optimizing the collocation of tax types and preferential methods, encouraging enterprises to face up to the role of tax enforcement as an external governance mechanism, and promoting the tax department to standardize the enforcement process and taxation services. The paper presents a range of theoretical and practical implications for both firm managers and policymakers.

Entrepreneurs’ Political Connections and Well-Being

Political connections are considered as individual-level social network, but little is known about the associations between political connections and personal outcomes (e.g., well-being) and its underlying mechanisms. Utilizing a sample of Chinese rural entrepreneurs, we aim to examine how political connections can shape their cognitive evaluation of subjective well-being (life and job satisfaction) by taking into consideration of mediating effects of rent seeking and institutional trust. Multilevel analyses reveal that political connections are positively associated with life and job satisfaction. Rent seeking and institutional trust function as mediators explaining the associations. Our study bears important theoretical implications for institutional influences on entrepreneur well-being as well as inspires policy makers relative to entrepreneurship.

Incentive strategies for construction project manager: a common agency perspective

According to the principal-agent theory, the agent should be motivated to behave in a manner consistent with the principal’s requirements. By expanding the focus from the bilateral principal-agent relationship within the firm to the triangular relationship between the client, the construction company and its project manager, this study seeks to explore a new way in which construction firms determining incentive strategies for their construction project managers (CPMs). A common agency model of ‘one servant of two masters’ is established while some negative/positive factors are identified, including rent-seeking effect, collusion effect and check-and-balance effect between the three parties. An autonomy-incentive grid is developed in which one can distinguish four alternative strategies. Implementation costs of each strategy in different scenarios are qualitatively assessed and a set of incentive strategies suitable for different scenarios are determined according to the complicatedness of the project and the type of the client. The model of ‘one servant of two masters’ may provide conceptual insights into incentive strategies for CPMs, and provide practical guidelines for construction firms, but at the same time, it needs testing, verifying and improving in the future practice.

Political Connection, Anti-Corruption Efforts and Firm¡¯s Loan Interest Rates

Using anti-corruption efforts as a natural experiment, we analyzes the effects and welfare consequences of political connection, with detailed data set of political connection and individual bank-loan contracts for listed companies in China from 2008 to 2014. We find that politically connected firms, on average, pay significantly lower loan interest rate, and firms would receive even lower interest rate if at least one of its top officers has or had served in government, or if their political connections are built by CEO or chairman of board, proves that political benefits exists in credit market. Our result also support that although both signaling and rent-seeking mechanism work in this process, rent-seeking effect plays a dominate role in China, specifically regional anti-corruption efforts and the recent anti-corruption campaign both reduce the favor of political connections in credit market.

Economic Growth: The Case of Irreversibility of Investment with Bargaining Power of Workers

ABSTRACTIn this paper, we develop a model of endogenous growth with search frictions in the labor market. We show that the growth rate of the economy may be durably altered in a case of investment irreversibility and bargaining power of workers. Labor market conditions mitigate this rent-seeking effect of workers.

Subsidies, rent seeking and performance: Being young, small or private in China

Entrepreneurs in emerging market economies operate in weak institutional contexts, which can imply different types of government. In some countries (e.g., Russia), the government is predatory, and the main risk faced by (successful) entrepreneurs relates to expropriation. In other countries (like China) this kind of risk is lower; nevertheless the government is intrusive, and the rules of the game remain fluid. The implication of the latter for entrepreneurs is that they are more likely to spend time and resources on influence (rent seeking) activities rather than on productive activities. We illustrate this type of government by focusing on the distribution of subsidies in China. We present a simple formal model that explores not only the direct effects of rent seeking for a company but also externalities under a situation of policy-generated uncertainty in the distribution of subsidies. We explore how these effects differ for the entrepreneurial sector (young, private and small companies) compared with other sectors. We posit that while the performance of private companies is more affected than the performance of state firms, the impact of government-induced uncertainty on young and small companies is actually less pronounced. Our empirical analysis, based on a unique large dataset of 2.4 million observations on Chinese companies, takes advantage of the regional and sectoral heterogeneity of China for empirical tests.

Institutions of conflict management and economic growth revisited: a short note

We study the effects of institutions of conflict management like corporatism, trust, civic norms and group membership on economic growth. By employing Schneider and Wagner’s (Kyklos 54:509–532, 2001) model and data from 1990–2011, we show that corporatism has (still) a positive coordination effect and a negative rent-seeking effect. The total effect is positive for most countries.

Assessing China's discriminative tax on Clean Development Mechanism projects. Does China's tax have so many functions?

In the practice of the Kyoto Protocol's Clean Development Mechanism (CDM), many CDM host countries heavily rely on high Global Warming Potential (GWP) Greenhouse Gas (GHG) projects. Among them, China might be unique in that it imposes a discriminative tax on projects dealing with high GWP GHGs. The Chinese government takes 65% of the carbon credits from HFC-23 (trifluoromethane) projects, 30% from N2O (nitrous oxide) projects, but only 2% from other types of projects. Previous studies have expected that this tax has multiple effects: rent-seeking effect, a deterrent effect on the HFC-23 and N2O projects, a channelling effect that switches the investment from HFC-23 and N2O projects to other types of projects, and a market distortion effect. However, with the positive analysis and empirical evidence, the present study shows that this tax only has rent-seeking effect, thus China's discriminative tax has been over read.

A Theory of Complementarity between Rent Seeking and Production

This paper uses a formal model to analyze the effects of rent seeking contest on production when the contestants are both rent seekers and producers and production output is an input of rent seeking effort. Great economies of scale in rent seeking and an even distribution of rent seeking capability among the contestants generate intense rent seeking rivalry, strong concern for relative productive and rent seeking capability and, larger production. In the extreme when rent seeking contest is very tense, the relative size of production input to rent seeking input grows and the contestants paradoxically behave and look more like producers rather than rent seekers. As applications, the paper studies how rent seeking contest affects the productive and rent seeking behavior of members of society, corporate workers, firms, political parties and states.

Federalist No. 10: Are Factions the Problem in Creating Democratic Accountability in the Public Interest?

Federalist No. 10 contains an optimistic view of the national government's ability to fulfill its obligations in the midst of what was, at the time, a small but challenged nation. This essay suggests that the founders did not anticipate the pernicious effects of rent seeking, corruption, and repression of minorities, and they failed to anticipate the calamities associated with slavery. The essay asks about the role of government as a party machine, a business, a policy process, and a contractor and examines a variety of contemporary theories for explaining government performance.

Rent Seeking, Employment Security, And Works Councils: Theory And Evidence For Germany

We highlight two effects of a works council that seem contradictory: the rent-seeking effect, which claims that a works council is set up by the workers to extract large rents from their employer, and the employment-security effect, which asserts that a works council is founded if the firm is financially stressed and workers are afraid of being dismissed. Since firms realize large rents only in good financial situations, there is a strict trade-off between both effects. We derive both the rent-seeking and the employment security effects theoretically, then test our theoretical approach with German firm-level data. Our econometric analysis clearly supports the rent-seeking effect, but not the employment-security effect.

The rise and decline of rent-seeking activity in the Brazilian coffee sector: Lessons from the imposition and removal of coffee export quotas

Summary Brazil, the world’s largest coffee exporter, encouraged efforts in the 1960s to form the International Coffee Agreement (ICA), which restricted total coffee exports via country export quotas. The quotas led to significant domestic quota rents in producing countries. This paper analyzes the effects of rent seeking in Brazil. The Brazilian Institute of Coffee (IBC), which was responsible for coffee policy, was the focus of rent seeking. The paper models the policy instruments used by the IBC; shows how rent seeking affected policy, industry efficiency, and the distribution of rents; explains the causes and effects of IBC reforms in the late 1980s; and draws lessons from the experience.

The Rise and Decline of Rent-Seeking Activity in the Brazilian Coffee Sector: Lessons from the Imposition and Removal of Coffee Export Quotas

Brazil, the world's largest coffee exporter, encouraged efforts in the 1960s to form the International Coffee Agreement (ICA), which restricted total coffee exports via country export quotas. The quotas led to significant domestic quota rents in producing countries. This paper analyzes the effects of rent seeking in Brazil. The Brazilian Institute of Coffee (IBC), which was responsible for coffee policy, was the focus of rent seeking. The paper models the policy instruments used by the IBC, shows how rent seeking affected policy, industry efficiency and the distribution of rents, explains the causes and effects of IBC reforms in the late 1980s, and draws lessons from the experience.

Reconciling the off-net cost pricing principle with efficient network utilization

The off-net-cost pricing principle argues that under a broad range of environments a positive “access” charge paid by originating networks to interconnected terminating networks would cause retail on-net usage rates to be set equal to their off-net counterparts, and that these rates would fully reflect the access charge. However, other work provides reasonable conditions under which on-net usage rates will not reflect access charges, but would be set to induce the social surplus maximizing level of on-net usage. This paper harmonizes these two apparently opposing results by showing that retail usage rates depend on two effects. One is a rent seeking effect on the part of networks and the other is an efficient utilization effect. In models in which the rent seeking effect is more important, on-net usage rates will tend to equal their off-net counterparts and incorporate the access charge. In models in which the efficient utilization effect matters more, on-net usage rates will not equal their off-net counterparts and will tend to promote efficient on-net utilization.

Reconciling the Off-Net Cost Pricing Principle with Efficient Network Utilization

The off-net-cost pricing principle argues that under a broad range of environments a positive charge paid by originating networks to interconnected terminating networks would cause networks to set on-net usage charges equal to off-net rates, and that these charges would fully reflect the access charge. However, other results in the literature provide reasonable conditions under which on-net usage charges will not reflect access charges, but would be set to induce the social surplus maximizing level of on-net usage. This paper harmonizes these two apparently opposing results by showing that retail usage charges depend on two effects. One is a rent seeking effect on the part of networks and the other is an efficient utilization effect. In models in which the rent seeking effect is more important, on-net usage charges will tend to equal their off-net usage charges and incorporate the access charge. In models in which the efficient utilization effect matters more, off-net usage charges will reflect access charges, while on-net usage charges will not be affected by the level of access charges, but instead will tend to be set at the levels that promote efficient on-net utilization.

Institutions of Conflict Management and Economic Growth in the European Union

High‐quality institutions of conflict management can serve to mitigate the negative effects of adverse external shocks and social conflict on long‐run economic growth. But in addition to the benefits (production‐enhancing cooperation), there are also costs (taxes and rent‐seeking) of conflict‐management institutions like corporatism and trust. We examine both positive and negative influences in the context of a simple growth model. Contrary to previous research, we predict a non‐linear relationship between institutions and growth. The empirical evidence from a panel for the years 1961‐1995 shows that neo‐corporatism and trust have each had independent positive effects on long‐run growth in the EU, suggesting that the diminishing product range of institutions has not yet been reached. Under an increasing size of government, however, both institutions lead to a dominating negative rent‐seeking effect.Our thanks for helpful comments go to the editors, an anonymous referee, Karl Aiginger, Mathias Dufour, Frauke Skudelny, Robert Urbatsch, seminar participants at the University of Linz, the Austrian Institute for Economic Research and discussants at the European Public Choice Society Meeting 2000 in Siena. All remaining errors are ours, of course. An extended version of this paper is available from the authors on request (Schneider and Wagner 2001). Further results are discussed in Wagner (2000).

On The Allocative Effects of Rent Seeking

We consider the effects of rent‐seeking activities on resource allocation. Before rent‐seeking activities take place, there are prior probabilities that an object will be given to one of several agents. The posterior probability depends on prior probabilities and the expenses incurred by all agents. In the case of two agents who equally value the object, prior and posterior probabilities coincide, and thus rent seeking has no effect on resource allocation. If there are two agents with different valuations of the object or we have more than two agents, rent seeking matters and posterior probabilities reflect the valuations of the agents.

RENT SEEKING CAN PROMOTE THE PROVISION OF PUBLIC GOODS*

Public officials often have little incentive to spend time and effort proposing policies that benefit others. When, however, some public policies generate rents to these officials, rent seeking in politics can motivate them to provide public goods. We consider the motivational effects of rent seeking on (i) policy, (ii) the the role of agenda‐setting in social choice theory, (iii) the effects of graft and corruption in government, and (iv) the validity of cost‐benefit analysis.