Rent-seeking and resource booms

This paper develops a model of rent-seeking in which the opportunity cost of rent-seeking is foregone entrepreneurship. It provides conditions under which resource booms tend to lead to an increase in rent-seeking activity and those in which they induce entrepreneurship. We identify an important difference between the two activities which leads resource booms to bias gains in favour of rent-seeking over entrepreneurship. But we also show that this bias depends on the nature of the initial equilibrium. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: O1; O4.