Forms of governance and the size of rent-seeking

Abstract

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 rentseeking 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.