chapter  4
20 Pages

The institutional context of rent seeking in economic transition


Under a political system with multiple sources of rent, manipulation of state authority for supernormal gains oftentimes creates an externality for bystanders and rent seekers alike.6 That is, it creates the need to transfer the immediate costs (e.g., taxes selectively exempted) of rent creation and it signals a perverse incentive for officials to invent regulatory and other hurdles for further rent creation. While rent seeking is not necessarily the main or sole cause of state predation, its growth is likely to have an enhancing effect on predatory state actions, especially those with selective targets.