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Rent Seeking in India: Its Costs and Policy Significance

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  • Sharif Mohammad
  • John Whalley

Abstract

In this paper we assess the resource cost of rent seeking activity in India, taking into account controls over foreign trade, capital markets, goods and labour markets. Using the approximation that the value of rents equals the welfare cost of rent seeking, gives a range from 30‐45 percent of GNP using data for 1980‐81. Some of the wider implications for the measurement of the welfare costs of distortions are discussed. The main development policy issues raised by the calculations are also outlined. Im vorliegenden Beitrag werden die Kosten geschätzt, die durch die Suche nach ökonomischen Renten entstehen, wenn Aussenhandel, Kapital‐, Güter‐ und Arbeits‐märkte kontrolliert werden. Nimmt man approximativ an, dass der Wert der Renten und die Wohlfahrtskosten der Suche nach diesen Renten übereinstimmen, erhält man für 1980‐81 einen Bereich von 35‐40 Prozent des Bruttosozialprodukts. Wir gehen auf einige allgemeinere Implikationen für die Messung der Wohlfahrtskosten von alloka‐tiven Störungen ein und diskutieren die wichtigsten entwicklungspolitischen Probleme, die unsere Berechnung aufwerfen. Dans cet article nous évaluons le coût en termes de ressources dûà la quête des rentes en Inde, prenant en considération le contrôle du commerce extérieur, des marchés de biens et de capitaux ainsi que du marché du travail. En utilisant comme approximation que la valeur des rentes équivaut le coût de bien‐être provenant de la quête des rentes on obtient un écart de 30–45 pourcent du PNB à partir de données pour 1980–81. Ce mémoire discute des questions que suscitent ces calculs en matiére de politique de développement et de façon plus générale de l'évaluation des coûts de bien‐êre dus aux distorsions.

Suggested Citation

  • Sharif Mohammad & John Whalley, 1984. "Rent Seeking in India: Its Costs and Policy Significance," Kyklos, Wiley Blackwell, vol. 37(3), pages 387-413, August.
  • Handle: RePEc:bla:kyklos:v:37:y:1984:i:3:p:387-413
    DOI: 10.1111/j.1467-6435.1984.tb00708.x
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    Citations

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    Cited by:

    1. John Mbaku & Chris Paul, 1989. "Political instability in Africa: A rent-seeking approach," Public Choice, Springer, vol. 63(1), pages 63-72, October.
    2. K.P. Kannan & N. Vijayamohanan Pillai, 2001. "The political economy of public utilities: A study of the power sector," Centre for Development Studies, Trivendrum Working Papers 316, Centre for Development Studies, Trivendrum, India.
    3. Arye L. Hillman & Heinrich W. Ursprung, 2016. "Where are the rent seekers?," Constitutional Political Economy, Springer, vol. 27(2), pages 124-141, June.
    4. Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 1998. "Rent Seeking with Bounded Rationality: An Analysis of the All-Pay Auction," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 225-250, Springer.
    5. repec:kap:iaecre:v:12:y:2006:i:2:p:241-250 is not listed on IDEAS
    6. repec:elg:eechap:15325_2 is not listed on IDEAS
    7. Sami Fethi & Hatice Imamoglu, 2021. "The impact of rent‐seeking on economic growth in the six geographic regions: Evidence from static and dynamic panel data analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5349-5362, October.
    8. repec:elg:eechap:15325_3 is not listed on IDEAS
    9. Van Long, Ngo, 2013. "The theory of contests: A unified model and review of the literature," European Journal of Political Economy, Elsevier, vol. 32(C), pages 161-181.
    10. Abdiweli Ali & Hodan Isse, 2006. "An Empirical Analysis of the Determinants of Foreign Aid: A Panel Approach," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(2), pages 241-250, May.
    11. Rajat Deb & Sourav Chakraborty, 2017. "Tax Perception and Tax Evasion," IIM Kozhikode Society & Management Review, , vol. 6(2), pages 174-185, July.
    12. Selden, Thomas M. & Wasylenko, Michael J., 1992. "Benefit incidence analysis in developing countries," Policy Research Working Paper Series 1015, The World Bank.
    13. Alcalde, José & Dahm, Matthias, 2010. "Rent seeking and rent dissipation: A neutrality result," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 1-7, February.
    14. Svensson, J, 1996. "Collusion Among Interest Groups : Foreign Aid and Rent-Dissipation," Papers 610, Stockholm - International Economic Studies.
    15. Lal, Deepak, 1995. "India and China: Contrasts in economic liberalization?," World Development, Elsevier, vol. 23(9), pages 1475-1494, September.
    16. Alexei Izyumov & John Vahaly, 2014. "Rent-Based Exploitation: Top, Bottom and Horizontal," Kyklos, Wiley Blackwell, vol. 67(1), pages 74-81, February.
    17. Shyam Kamath, 1988. "Partially suppressed markets: Controls, rent seeking and the cost of protection in the indian sugar industry," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 124(1), pages 140-160, March.
    18. Shah, Anwar & Whalley, John, 1990. "An alternative view of tax incidence analysis for developing countries," Policy Research Working Paper Series 462, The World Bank.
    19. repec:elg:eechap:15325_23 is not listed on IDEAS
    20. Gupta, Abhay, 2009. "Pre-reform Conditions, Intermediate Inputs and Distortions: Solving the Indian Growth Puzzle," MPRA Paper 14481, University Library of Munich, Germany.

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