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19 Cato J. 7 (1999-2000)
Rent Seeking and Economic Growth: Evidence from the States

handle is hein.journals/catoj19 and id is 11 raw text is: RENT SEEKING AND ECONoMIC GROWTH:
EVIDENCE FROM THE STATES
Harold J. Brumm
Any significant government intervention beyond the limits defined
by the minimal or protective state will counter, indeed may block,
the dissipation of rents (Buchanan 1980: 7). Rent-seeking activity
retards economic growth, because it merely redistributes wealth; rent
seekers (unlike profit seekers in a competitive market) do not create
wealth. To the extent that economic growth is a desideratum, a goal
of public policy should be the restraint of government interventions
that create and sustain artificial rents (i.e., payments above opportunity
costs from contrived scarcities created by government grants of eco-
nomic power).'
The seminal work of Robert Barro (1991) has spawned a huge
empirical literature on the determinants of economic growth. Yet, as
Robert Tollison (1995: 358) points out, an empirical question that
remains largely unexplored is the extent to which economic growth
is affected by rent seeking.' The purpose of this paper is to assess
that issue empirically by examining data for the 48 contiguous states.
Empirical Model Specification
The empirical literature on economic growth has identified a variety
of possible determinants of the rate of economic growth. The basic
Cato Journal, Vol. 19, No. I (Spring/Summer 1999). Copyright @ Cato Institute. All
rights reserved.
Harold J. Brumm is Senior Economist in the Office of the Chief Economist at the U.S.
General Accounting Office. The views expressed in this paper are those of the author and
should not be attributed to the U.S. GAO. This paper has benefited from the comments
of an anonymous referee.
'In addition to persistent artificial rents, which inevitably can be traced to government
interventions of one sort or another, at any point in time there exist natural rents, which
are inherent to the price system (Tollison 1982: 575).
2The author is aware of just two empirical studies that investigate the effect of rent seeking
on economic growth: Murphy, Shleifer, and Vishny (1991), which examines data at the
national level for a cross-section of 91 countries, and Rama (1993), which examines Uruguay
time-series data at both the national and sectoral levels for the period 1925-83.

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