Forms of governance and the size of rent-seeking

In this paper we present a model where agents can choose between productive and rent-seeking activities. We consider two governance institutions: autocracy and parliament rule. Under autocracy rent-seeking reflects the taste of the autocrat for such activities. Under parliament rule rent-seeking depends on parliament voting. We show that under parliament rule the size of rent-seeking may be larger than under autocracy. This cast doubts on the idea that “rigth” institutions necessarily promote good economic performance. We also show that rent-seekers may be interested in overthrowing autocracy.

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