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Technological Progress and Rent Seeking

Author

Listed:
  • Vincent Glode
  • Guillermo Ordoñez

Abstract

We model firms’ allocation of resources across surplus-creating (ie, productive) and surplus-appropriating (ie, rent-seeking) activities. Our model predicts that industry-wide technological advancements, such as recent progress in data collection and processing, induce a disproportionate and socially inefficient reallocation of resources toward surplus-appropriating activities. As technology improves, firms rely more on appropriation to obtain their profits, thereby endogenously reducing the impact of technological progress on economic progress and inflating the price of the resources used for both types of activities. Our theoretical insights shed light on the rise of high-frequency trading.

Suggested Citation

  • Vincent Glode & Guillermo Ordoñez, 2025. "Technological Progress and Rent Seeking," The Review of Financial Studies, Society for Financial Studies, vol. 38(4), pages 1259-1289.
    • Handle: RePEc:oup:rfinst:v:38:y:2025:i:4:p:1259-1289.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhae031
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    More about this item

    Keywords

    D21; D24; G23; O33; O41;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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