EFFECTS OF RENT-SEEKING ON ECONOMIC GROWTH IN LOW-INCOME ECONOMIES

  • Zi Wen Vivien Wong
  • Fanyu Chen Universiti Tunku Abdul Rahman, Malaysia
  • Thian Hee Yiew
Keywords: Rent-seeking, Economic growth, System generalized method of moments estimator, Low-income countries

Abstract

Sluggish growth in low-income countries, despite the high performance in other economic indicators, motivates the literature to switch attention to institutions. Despite its crucial economic implications, there is limited attention on rent-seeking as a driver of economic growth in low-income countries. This paper investigates the effect of rent-seeking on growth in low-income countries from 2004 to 2017using the system generalized method of moments estimator. The empirical results reveal that rent-seeking negatively affects growth, implying that it obstructs the pace of economic development in low-income countries. Hence, it is necessary for policymakers in these countries to adopt anti-rent-seeking policies to promote a rapid and sustainable growth.

Downloads

Download data is not yet available.

References

Aidt, T. S. (2016). Rent Seeking and the Economics of Corruption. Constitutional Political Economy, 27, 142-157.

Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equation. Review of Economic Studies, 58, 277-297.

Auriol, E. (2006). Corruption in Procurement and Public Purchase. International Journal of Industrial Organization, 24, 867-885.

Auriol, E., Straub, S., & Flochel, T. (2016). Public Procurement and Rent-seeking: The Case of Paraguay. World Development, 77, 395-407.

Bal, D. P., Dash, D. P., & Subhasish, B. (2016). The Effects of Capital Formation on Economic Growth in India: Evidence From ARDL-bound Testing Approach. Global Business Review, 17, 1388-1400.

Barro, R. J. (1991). Economic Growth in a Cross Section of Countries. The Quarterly Journal of Economics,106, 407-443.

Blomqvist, Å., & Mohammad, S. (1986). Controls, Corruption, and Competitive Rent-Seeking in LDCs. Journal of Development Economics, 21, 161-180.

Brooks, M. A., Heijdra, B. J., & Lowenberg, A. D. (1990). Productive Versus Unproductive Labor and Rent Seeking: Lessons from History. Journal of Institutional and Theoretical Economics (JITE), 419-438.

D’Agostino, G., Dunne, J. P., & Pieroni, L. (2016). Spending, Corruption and Economic Growth. World Development, 84, 190-205.

Das, A., Dash, D. P., & Sethi, N. (2020). Innovation, Corruption, and Economic Growth in Emerging Asia. Buletin Ekonomi Moneter dan Perbankan, 23, 347-364.

Federal Reserve Bank of St Louis. (2015). Trapped: Few Developing Countries Can Climb the Economic Ladder or Stay There. https://www.stlouisfed.org/publications/regional-economist/october-2015/trapped-few-developingcountries-can-climb-the-economic-ladder-or-stay-there

Galtung, J. (1971). A Structural Theory of Imperialism. Journal of Peace Research, 8, 81-117.

Gwartney, J. D., Holcombe, R. G., & Lawson, R. A. (2006). Institutions and the Impact of Investment on Growth. Kyklos, 59, 255-273.

Gyimah-Brempong, K. (2002). Corruption, Economic Growth, and Income Inequality in Africa. Economics of Governance, 3, 183-209.

Huang, C. J. (2016). Is Corruption Bad for Economic Growth? Evidence from Asia-Pacific Countries. The North American Journal of Economics and Finance, 35, 247-256.

Iqbal, N., & Daly, V. (2014). Rent Seeking Opportunities and Economic Growth in Transitional Economies. Economic Modelling, 37, 16-22.

Juhro, S. M., Narayan, P. K., Iyke, B. N., & Trisnanto, B. (2020). Is There a Role for Islamic Finance and R&D in Endogenous Growth Models in the Case of Indonesia? Pacific-Basin Finance Journal, 62, 101297. https://doi.org/10.1016/j.pacfin.2020.101297

Krueger,A.O. (1974). The Political Economy of Rent Seeking Society. American Economic Review,64, 291-303.

Mauro, P. (1995). Corruption and Growth. The Quarterly Journal of Economics, 110, 681-712.

Méon, P. G., & Weill, L. (2010). Is Corruption an Efficient Grease?. World development, 38, 244-259.

Mishra, P., Montiel, P., Pedroni, P., & Spilimbergo, A. (2014). Monetary Policy and Bank Lending Rates in Low-income Countries: Heterogeneous Panel Estimates. Journal of Development Economics, 111, 117-131.

North, D. C. (1991). Institutions. Journal of Economic Perspectives, 5, 97-112.

Paul, P. B. (2010). Does Corruption Foster Growth in Bangladesh? International Journal of Development Issues, 9, 246-262.

Pesaran, M. H. (2004). General Diagnostic Tests for Cross Section Dependence in Panels (No. 1229). CESifo Working Paper.

Schumpeter, J. A. (1961). The Theory of Economic Development: An Inquiry Into Profits, Capital, Credit, Interest, and the Business Cycle. Transl. by Redvers Opie: Oxford University Press.

Solow, R. M. (1956). Technical Change and the Aggregate Production Function. The Review of Economics and Statistics, 312-320.

Titl, V., & Geys, B. (2019). Political Donations and the Allocation of Public Procurement Contracts. European Economic Review, 111, 443-458.

Tullock, G. (1967). The Welfare Costs of Tariffs, Monopolies, and Theft. Economic Inquiry, 5, 224-232.

Ugur, M., & Dasgupta, N. (2011). Corruption and Economic Growth: A Meta-Analysis of the Evidence on Low-income Countries and Beyond. MRPR Paper, 1-43.

Valeriani, E., & Peluso, S. (2011). The Impact of Institutional Quality on Economic Growth and Development: An Empirical Study. Journal of Knowledge Management, Economics and Information Technology, 1, 1-25.

Wang, J. Y. (1990). Growth, Technology Transfer, and the Long-run Theory of International Capital Movements. Journal of International Economics, 29, 255-271.

World Bank. (1997). World Development Report 1997: The State in a Changing World. New York: Oxford University Press.

World Bank. (2017). World Bank Annual Report 2017. Retrieved from https://thedocs.worldbank.org/en/doc/9084815074037546700330212017/original/AnnualReport2017WBG.pdf

Published
2021-06-30
How to Cite
Wong, Z. W. V., Chen, F., & Yiew, T. H. (2021). EFFECTS OF RENT-SEEKING ON ECONOMIC GROWTH IN LOW-INCOME ECONOMIES. Buletin Ekonomi Moneter Dan Perbankan, 24(2), 205 - 220. https://doi.org/10.21098/bemp.v24i2.1386
Section
Articles