Rent-seeking Research Articles

Institutional Quality and Economic Performance in the Southern African Development Community (SADC) Region: A Dynamic Panel Analysis

The quality of institutions has increasingly become a key determinant of economic performance. This confirms a paradigm shift from the conventional macroeconomic determinants to governance as the crucial determining factor of economic performance, particularly in developing countries where economic growth is stagnant or moving at a meagre rate. With the aid of macroeconomic and governance data, this paper reports on an empirical analysis performed to quantify the impact of institutional quality on economic performance in Southern African economies over the period 2009-2019 by employing Generalized Method of Moments (GMM) technique with fixed effects. The empirical results indicate a negative and statistically significant coefficient for the governance index, inflation, and natural resources towards GDP growth. In contrast, trade openness, financial development, and domestic investment have positive and statistically significant coefficients. Based on the composite governance index, these results suggest that a weak institutional environment that aggravates corruption levels causes instability while also stimulating rent-seeking behaviour, which ultimately stifles economic performance in the region. Therefore, to attain inclusive and sustainable economic growth rates, the regional authorities should strengthen the law and enforce the rules.

Welfare effect of rent-seeking activities under international management of fishery resources

Fishery resources face a depletion crisis due to accelerated international trade. Therefore, some countries have introduced local individual transferable quotas (ITQs). However, even if the government in a home country adequately manages fishery resources, fishers in a foreign country may overcatch fish because they can obtain allocation rent for the ITQ. If the home country actively imports marine products from foreign countries with allocation rent, the depletion of fishery resources could further accelerate. This leads to international political conflicts over fishery resource management. To address this problem, this study investigates the effect of quotas on welfare using a two-country model with a renewable resource as the fishery resource. The model considers a local ITQ market with rent seeking for the quotas. Opening up trade improves welfare in the foreign country, while the welfare effect in the home country depends on the degree of foreign rent-seeking activities. Under an international economy, welfare in the foreign country may increase by sufficiently decreasing resource firms' rent seeking via increased foreign quota levels. However, the policy decreases welfare in the home country because the total income falls due to a decrease in the domestic quota price. Therefore, the competition for increasing ITQs between governments may deplete fishery resources. This study thus suggests that a cooperative marine policy between governments is important for the international management of fishery resources.

Rent-seeking Practices in the Housing Development Approval Process

The lengthy, uncertain and onerous planning approval process in various countries around the world has prompted frustrated housing developers to seek influence by paying off approving officials. A research was conducted in Malaysia to investigate in greater detail this rent-seeking phenomenon by asking six fundamental questions. Rich data were obtained by interviewing 22 housing developers and consultants who work for them. Developers engage in rent-seeking behaviours to overcome genuine and artificial hurdles when applying for development approval. All approving agencies, though not all their staff, reciprocate to such behaviours. The monetary value of the payoffs depend on the rank of the public actor and project features. The higher the office holder is, the larger is the expected pay-off. Big and complex development projects in urban centres have a higher pay-off tag. Low value items television sets and car repairs serve to support normal lifestyle whereas high value items such as golfing and holiday trips support lavish lifestyle. Establishing good rapport is a prerequisite to the rent seeking and giving exchange. Elements which help foster reciprocity by state actors to housing developers’ rentseeking behaviours include low civil servant salary and high living cost, and weak punitive action. Common ethnicity facilitates nuanced communication by the latter, but common religion may dampen the former’s enthusiasm to accept any payoffs. Eventually house buyers and the general public are the casualties by virtue of higher house prices and substandard infrastructure. Given the combination of inherent features of the planning system and certain elements that impinge on state actors both of which promote rent-seeking practices, a realistic law enforcement solution is to prioritise illicit market-state exchanges involving grossly distorting rent extraction and pecuniary rewards of significant magnitude rather than total eradication of the practice.

Persepsi Auditor atas Konflik Kepentingan dan Perburuan Rente dalam Mendeteksi Indikasi Fraud

This study aims to prove that conflict of interest and rent seeking have a positive effect on indications of fraud based on the auditor’s perception. Indications of fraud in this study using the theory of fraud pentagon which consists of pressure, rationalization, opportunity, capability, and arrogance. Furthermore, conflicts of interest are seen from personal, relational, cultural, and structural indicators. While the indicators of rent seeking are seen from working capital, debt, corporate immunity, creative accounting, and corporate governance. This research is quantitative research using primary data. The population in this study are auditors who work in public accounting firms. The research sample consisted of 100 samples and was obtained using non-probability sampling and incidental sampling methods. The data analysis technique used the Partial Least Square method which consisted of descriptive and verification analysis. The results of the study show that conflicts of interest and rent seeking have a positive and significant effect on indications of fraud. The results of this study support the fraud pentagon theory that conflict-of-interest activities and rent seeking have an influence on indications of fraud.How to Cite: Silooy, N. P., & Novita. (2021). Persepsi Auditor atas Konflik Kepentingan dan Perburuan Rente dalam Mendeteksi Indikasi Fraud. Akuntabilitas: Jurnal Ilmu Akuntansi, 14(2), 255-268.

Behavioral Pattern of Rent Distribution of Subsidized Fertilizer)

The subsidized fertilizer policy is the government's effort to increase agricultural production and productivity in general. However, in the distribution process, there are still various distribution problems that lead to rent-seeking behavior. The purpose of this research is to describe the behavior of rent-seekers in the distribution of subsidized fertilizers. The research method used is focus group discussion (FGD) involving various stakeholders including (1) government, (2) academics, (3) associations, (4) farmer groups, (5) government-owned enterprises, and fertilizer distributors. The results showed that there had been a pattern of rent-seekers distributing subsidized fertilizers to farmers. The behavior of these rent-seekers includes fertilizer prices exceeding the Highest Economic Price (HET), transaction costs, fertilizer distribution that is not on target until there is a shortage of fertilizer. The government needs to develop a new strategy to optimize the distribution of subsidized fertilizers to farmers. The strategy is to change the subsidy policy to a direct subsidy to farmers. Furthermore, the government needs to optimize investment in the agricultural sector in the form of technology, human resources, electricity, and road infrastructure.

Axiomatizing additive multi-effort contests

A rent seeking model is axiomatized where players exert multiple additive efforts which are substitutable in the contest success function. The axioms assume the sufficiency of exerting one effort, and that adding an amount to one effort and subtracting the same amount from a second equivalent substitutable effort keeps the winning probabilities unchanged. In contrast, the multiplicative Cobb–Douglas production function in the earlier literature requires players to exert all their complementary efforts. The requirement follows from assuming a homogeneity axiom where an equiproportionate change in two players’ matched efforts does not affect the winning probabilities. This article abandons the homogeneity axiom and assumes an alternative axiom where the winning probabilities remain unchanged when a fixed positive amount is added to all players’ efforts. This article also assumes a so-called summation axiom where the winning probabilities remain unchanged when a player substitutes an amount of effort from one effort into another effort. The summation axiom excludes multiplicative production functions, and furnishes a foundation for additive production functions.

How local leaders matter: Inter-provincial leadership transfers and land transactions in China

We study how local leaders matter for economic growth by examining the impacts of exogenous transfers of leaders across China’s provinces on land transactions in the primary market. We find that new provincial leaders attract investment in industrial land from the provinces of their previous positions. The leaders’ impacts are greater when their freedom to deploy their business connections in the land market is greater. More importantly, we find evidence of positive impacts of land transactions on economic growth, which should bode well for the careers of the local leaders, albeit there is some evidence of rent seeking among officials especially when they are too old for further promotion.

Rent-Seeking through collective bargaining: Teachers unions and education production☆

We explore how teachers unions affect education production by comparing outcomes between districts allocating new tax revenue amidst collective bargaining negotiations and districts allocating tax revenue well before. Districts facing union pressure increase teacher salaries and benefits, spend down reserves, and experience no student achievement gains. Conversely, districts facing less pressure hire more teachers (instead of increasing compensation) and realize significant student achievement gains. We interpret these results as causal evidence of the negative impact of teacher rent seeking on education production, as the timing of district tax elections relative to collective bargaining appears to be as good as random.

Does Rent-Seeking Affect Environmental Regulation?

Resource utilization not only meets the needs of economic development, but also has a far-reaching negative impact on the environment. Environmental regulation is regarded as the key measure to solve environmental pollution. However, the rent-seeking behavior of local enterprises will seriously weaken the implementation effect of environmental regulations. Under the background of the development of big data era, the massive micro enterprise data provided by China's private enterprise survey database provides favorable conditions for this paper to study its impact effect from the direction of big data. This paper uses OLS model and Tobit model to investigate the impact of rent-seeking on the implementation effect of environmental regulation. The results show that environmental regulation will make honest enterprises actively reduce output to control the emission level. However, rent-seeking enterprises will further expand their output to gain greater profits because they are sheltered by local governments.

It is not OK but it works – unproductive entrepreneurship, the case of Poland

The concept of unproductive entrepreneurs was introduced to science by Baumol, who pointed out the differences in business output between countries. Unproductive behaviour of entrepreneurs is often a consequence of ineffective institutions used by entrepreneurs for rent seeking. The aim of this article is to examine subjective norms (S.N.) and attitudes regarding specified types of unproductive entrepreneurship, which in many cases takes the form of unethical or even unlawful behaviour among entrepreneurs in Poland. Examples of such behaviour are: bribery and tax evasion, burdensome lawsuits, often unfounded or lobbying. The structure of the research was based on Baumol’s work while the research model was based on Ajzen’s theory of planned behaviour (T.P.B.). In this article we argue that unproductive entrepreneurship in transforming economies is often forced by inefficient institutions and the desire to avoid bankruptcy. The results of the survey carried out among 270 Polish entrepreneurs indicated a permissive and subjective standard regarding tax evasion when the existence of their business is endangered, and more negative behavioural beliefs (B.B.) regarding the effectiveness of tax evasion than regarding the effectiveness of paying bribes (P.B.).

Obstacles to linkage-based diversification in the oil and gas sector

Participation in global value chains seemingly offers prospects for resource peripheries to achieve linkage-based diversification through strategies of ‘thinning’ and ‘thickening’. The viewpoint presents insights from field research on the oil and gas sector in Argentina, Bolivia, Ghana and Namibia. Each case study reveals a particular challenge: downgrading of local suppliers, entry barriers to high-value added tasks, insufficient scale of exploration activities and rent seeking related to local content legislation. Although this list is not comprehensive, the viewpoint helps to better understand the poor economic performance of resource peripheries. The author concludes that it may be reasonable to consider development paths beyond extractive industries.

Tax enforcement and corporate donations: evidence from Chinese ‘Golden Tax Phase III’

ABSTRACT Using the implementation of “Golden Tax Phase III” as a quasi-natural experiment, we take the difference-in-differences (DID) method to examine how changes in taxation technology affect firm donations. Specifically, “Golden Tax Phase III” has reduced the donation level of private enterprises (−21.6%). Moreover, the treatment effect is particularly pronounced in regions with low taxation capacity and enterprises with high tax avoidance. Additional tests show that enhanced tax enforcement decreases rent-seeking donations rather than squeezes out market-oriented donations, and the reduction of donations is not due to the deterioration of cash flow capacity. Overall, these results suggest that the improvement of taxation technology will restrict rent-seeking behaviour and regulate the corporate social responsibility activities of the enterprises. This study not only enriches the relevant research on tax enforcement and corporate social responsibility but also emphasises the significant impact of information infrastructure construction.

Economic Integration of Small and Medium Enterprise in Manufacturing Sector: The Case of Ethiopia, Tigray Regional State Mekelle City

The purpose of this study is to assess the economic integration of small and medium enterprises (SMEs) in Tigray, Ethiopia. Focusing mainly on strategies, enabling environment, competitiveness, and challenges of the economic integration of SMEs. This study was employed in a cross-sectional mixed approach method. The data were collected using 148 samples based on proportional stratified sampling after a pilot test was managed and analyzed using SPSS. It presented using percentage, mean, standard deviation, and ordinary least squire regression model. Interviews with 15 leaders and stakeholders, 8 focus group discussions were conducted with the SMEs council and a non-participatory observation of the researcher. The result indicates that SMEs are operated by owners and families, which implies that contribution to employment and income generation for others is very limited. Access to finance, work promising, market linkage, and quality and quantity input were also the general challenge of all SMEs. Peace and security among Ethiopian Regions and the Ethio-Eriteria border, the dependency mentality and rent-seeking behavior of SMEs operators are other challenges of SMEs. Also, the commitment, attitude, and capacity of the leaders at a different level to support and coordinate SMEs is weak. Thus, policies and strategies should review and adjust considering the current political situation. Capacity building to operators and agency leaders are very critical. Finally, special financial institutions and market supporting unit should be established to help SME’s competitiveness. Work promises and infrastructure should be ready before the SMEs was established. Keywords: Small and Medium Enterprise, Economic Integration of Small Enterprises, Challenges, Tigray, Ethiopia DOI: 10.7176/JESD/12-19-01 Publication date: October 31 st 2021

Rent seeking, supervisor approvals and conventional corruption control approach—an Indian experience

Rent seeking, supervisor approvals and conventional corruption control approach—an Indian experience

An Analysis on the Effect of Rent-seeking Behavior for Public Goods on Housing Prices: focusing on the case of changing the name of Jamsilsaenae station in Seoul

An Analysis on the Effect of Rent-seeking Behavior for Public Goods on Housing Prices: focusing on the case of changing the name of Jamsilsaenae station in Seoul

Income inequality and oil resources: Panel evidence from the United States

The resource curse is sometimes associated with poor resource-rich countries. However, using panel evidence from the United States, we find that the resource curse is also prevalent in a wealthy resource-rich country. This study investigates the impact of oil resources on income inequality, with a particular focus on distinguishing between the effects from oil abundance (i.e. production) versus oil dependency (i.e. consumption). We observe contrasting non-monotonic outcomes from oil abundance in comparison to oil dependency. For oil abundance, states with low oil production will have less inequality if they increase oil production, and states with high oil production will have increased income inequality if they increase production. The opposite holds true for oil dependency. The findings suggest several channels of concern. For example, oil-rich states are more vulnerable to rent-seeking behaviour as oil production and oil revenues increase, which can adversely affect the income distribution gap. On the other hand, oil-dependent states are more likely to be affected by commodity price shocks which can increase income inequality.

Russia, transition and poland’s energy security: a retrospective view

ABSTRACT This article asserts that debates concerning Poland’s energy security should be analysed in the context of transition politics and domestic politics. Most importantly, domestic politics reveal the corrupted environment of the 1990s and early 2000s, which allowed Polish and Russian political, commercial and private actors to engage in rent seeking activities. The collusion between the two sets of actors had a detrimental effect on the way in which the debate concerning Polish energy security has developed. Furthermore, corruption scandals that brought to the open murky dealings between the Russian oil and gas sectors and Polish political actors, have not only kept generating interest around the question of the country’s energy security but also further fuelled concerns about Russia’s real intentions.

The Sustainability of Independent Palm Oil Smallholders in Multi-Tier Supply Chains in East Kalimantan Indonesia

The smallholder oil palm farmers (SHFs) manage almost half of the Indonesian oil palm area, often associated with unsustainable oil palm sources. There has been limited research conducted to assess SHFs status in Indonesia. This study analyzed sustainability of existing Multi-tier Supply Chain Management through Rapfish diagnostic application with Multi-Dimensional Scaling (MDS) in oil palm mills, suppliers, and SHFs. This study found triadic typologies of MSCs in the Kutai Kartanegara District and six sustainability dimensions including economic, social, ecology, political, and institution to improve the regional strategy for sustainable palm oil plantations in the East Kalimantan Province. The closed triadic relationship in Gunung Sari and Pulau Pinang Villages has better performances on four sustainability dimensions compare to other villages. The oil palm mills could connect directly with SHFs and reduce asymmetric information and rent-seeking behavior through the traceable land ID system and enabling the Public-Private Partnership program.

The influence of government subsidy on enterprise innovation: based on Chinese high-tech enterprises

This paper uses data from all the listed high-tech enterprises in China, from 2013 to 2018, as the samples employed to study the impact of government subsidies on the innovation of high-tech enterprises, as well as the subsidy mechanism. The mechanism is analysed mainly from the perspectives of resource effect and signal transmission effect. In the theoretical analysis, from the perspective of resource effect, the capital guiding role of government subsidies is considered. In addition, this study creatively discusses the impact of rent-seeking behaviour in combination with China's anti-corruption practice. From the perspective of signal transmission, government subsidies are no longer only interpreted as positive signals of the government being in favour of enterprise financing. This study further believes that government subsidies transmit a signal to the public, encouraging them to strengthen their supervision of subsidised enterprises. A multiple regression model and mediating effect model indicate that government subsidies achieve the purpose of stimulating enterprise innovation. The stimulating effect of government subsidies through financing constraints and signal transmission is 9.48% and 10.16%, respectively. These results are consistent with the positive externality theory and the signal transmission theory. At the end of the paper, several relevant suggestions are presented, according to the current developments.

Acquiring firms' earnings management in stock-for-stock mergers within Korean business groups

PurposeThis study examines acquirers' earnings management in intragroup mergers to investigate whether stock-for-stock mergers between affiliated firms within the same family-controlled business group facilitate the controlling shareholder's rent seeking. Specifically, it investigates the acquiring firm's incentive to inflate premerger-announcement earnings in intragroup mergers given the controlling shareholder's relative equity holdings in the target and acquiring firms. The authors also examine how creditor monitoring affects premerger-announcement earnings in intragroup mergers compared to mergers between independent firms.Design/methodology/approachUsing univariate analysis, panel regression based on accruals and cross-sectional regression based on discretionary accruals, the authors compare earnings management in mergers between affiliated firms with that in mergers between independent firms in the context of Korean business groups. The authors also compare the effects of creditors on earnings management in both cases.FindingsAcquirers' premerger-announcement positive abnormal accruals are less evident in mergers between affiliated firms than in mergers between independent firms. These accruals decrease with high financial leverage only in the latter case, suggesting that creditor monitoring mitigates earnings management only in independent firm mergers.Originality/valueThe authors examine intragroup mergers, unlike previous studies, which focus on unaffiliated firm mergers. They also contribute to the literature on stock-for-stock mergers, showing that lender monitoring can mitigate the acquiring firm's premerger earnings management in unaffiliated firm mergers but not in intragroup mergers. These findings suggest that stock-for-stock mergers between affiliated firms may facilitate the controlling shareholders' rent seeking, which has policy implications for emerging markets with large family-controlled business groups.