RENT-SEEKING AND ECONOMIC-GROWTH - A THEORETICAL-MODEL AND SOME EMPIRICAL-EVIDENCE

This paper introduces distributional activities in one of the simplest endogenous growth models. Firms engage in investment and lobbying, with the extent of the latter determining the number of restrictive regulations in force. As a result, the growth rate increases with the private cost of passing a regulation, while dynamics include rise and decline, as in Olson's theory. The empirical evidence is from Uruguay, a relatively wealthy country that has dramatically lagged behind. It shows that restrictive regulations have a positive impact on sectoral output, but a negative impact at the aggregate level, which is consistent with the model.