Essays on rent seeking and productivity

• Main Author: Lopez Licea, Jose Joaquin
• Format: Dissertation
• Language: English
• Published: ProQuest Dissertations & Theses 01.01.2014
• Subjects: Attorneys; Bribery; Business to business commerce; Capital expenditures; Capital stock; Collateral; Commerce-Business; Competition; Consumption; Corruption; Cost control; Developing countries; Dissertations & theses; Economic development; Economic theory; Employees; Entrepreneurs; Entrepreneurship; Equilibrium; Evolution; GDP; Gross Domestic Product; Interest rates; Labor economics; Lagrange multiplier; LDCs; Lobbying; Productivity; Tax rates; Wage rates; Wages & salaries; Workers
• ISBN: 1321036094; 9781321036091

This thesis consists of two chapters. The first chapter studies the aggregate effects of the interaction between financing constraints and regulations that allow bribery. I develop and calibrate a model in which financially constrained entrepreneurs are subject to both idiosyncratic productivity shocks and a policy distortion that reduces the optimal size of the firm. These entrepreneurs have access to a rent-seeking technology that allows them to bribe to mitigate the policy distortion. While bribery eliminates some of the "sand in the gears," its full private benefits accrue to the richest—and not necessarily to the most productive entrepreneurs. This misallocation magnifies the aggregate productivity losses from financial frictions and slows down both capital and wealth accumulation. The second chapter studies growth through knowledge creation for a class of individuals whose careers consist of rent-seeking activities. I develop a model in the spirit of Lucas (2009), where rent-seekers coexist with productive agents. Much like their productive counterparts, rent-seekers learn from each other and advance their own knowledge frontier. Because rent-seeking has no productive component, technological advances in this sector mean that its members steadily become better at extracting output from the productive sector. I use the model to analyze how technological progress in rent-seeking affects relative rewards between rent-seeking and productive careers. The model predicts that relative average rewards depend only on the quality of the rent-seeking environment. I present evidence for the US on the evolution of the relative rewards between lawyers and other college educated workers during the period 1960-2010, and show how the model can be calibrated to fit some of the observed data.