ABSTRACT
Economic rent is a payment to a factor of production above its opportunity cost. Government protection against competition comes at a cost: firms must invest resources to influence policymakers. Because rent seeking depends on the degree to which government intervenes in the economy, institutions are important in explaining the size of the rent-seeking industry. This chapter focuses on direct use of resources to capture the artificially created rents and looks at government intervention in select countries in Asia, Latin America, and Africa. Because rent seeking depends on the degree to which government intervenes in the economy, institutions are important in explaining the size of the rent-seeking industry. India provides a good example of how government intervention results in large social costs both due to rent seeking and other activities such as rent protection. Rent seeking retards economic growth in many ways. Rent seeking is associated with government intervention in markets.
