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The Welfare Effects of Rent-Saving and Rent-Seeking

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  • Shannon K. Mitchell

Abstract

This paper uses an overlapping-generations framework to model the allocation of import licences of intermediate goods according to firm capacity. It shows that this method of allocation encourages rent-seeking and also thereby improves welfare compared with a method that does not allow rent-seeking. A. O. Kreuger (1975, 1974) and J. N. Bhagwati and P. Desai (1970) describe how Turkey and India have allocated imports on the basis of firm capacity, which led to rent-seeking through overexpansion of capacity. J. N. Bhagwati and T. N. Srinivasan (1980) first recognized the possibility that rent-seeking may actually improve welfare in the presence of a distortion, as it does in this paper.

Suggested Citation

  • Shannon K. Mitchell, 1993. "The Welfare Effects of Rent-Saving and Rent-Seeking," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 660-669, August.
    • Handle: RePEc:cje:issued:v:26:y:1993:i:3:p:660-69
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    Cited by:

    1. Kai Zhao, 2015. "Product competition and R&D investment under spillovers within full or partial collusion games," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 24(1), pages 1-27, December.
    2. Arijit Mukherjee, 2002. "Advantageous or Disadvantageous Semi-collusion Licensing in a Vertically Separated Industry," Industrial Organization 0211006, University Library of Munich, Germany.
    3. Ma, Tay-Cheng, 2008. "Disadvantageous collusion and government regulation," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 168-185, January.
    4. Shannon K. Mitchell, 1995. "The Political Economy Of Quota Rents In A Dynamic International Trade Model," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 243-261, November.

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