Autore
Pugno, Maurizio

Titolo
Stability and multiple equilibria in a model of talent, rent seeking, and growth
Periodico
Università degli studi di Trento. Dipartimento di Economia. Discussion papers
Anno: 1998 - Fascicolo: 8 - Pagina iniziale: 1 - Pagina finale: 38

A model of allocation of heterogeneous talent between rent-seeking and productive activity adopting a Ricardian representation is proposed in order to study the existence and the stability of equilibria of steady state growth rates. In a first version of the model only workers seek rent. This predicts that they will tend to absorb the whole product, insofar as a higher rent reward than the wage rate is allowed for. A stable equilibrium is possible if talent distribution is very unequal. These dynamics bave a level effect, however, and not a growth effect. In a second version, rent seeking is organised by firms of entrepreneurs and workers. This version predicts that, besides the tendency to collapse, the economy may be attracted into an equilibrium without rent-seeking if the entrepreneurs earn a higher rent reward according to their ability. If on the contrary a group of them colludes to earn a homogeneous reward, a stable equilibrium with both rent seeking and production exists, where rent seeking negatively affects steady state growth. This model thus gives account of both Murphy, Shleifer and Vishny's insight into corner equilibria, and of Olson's argument on coalitions. It also gives explanations to various facts about individuai and organised crime, while history emerges to be important.




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