An Open Economy Model of Political Influence and Competition Among Rent Seeking Groups

Terry L. Roe, A. Erinc Yeldan, Terry L. Roe & A. Erinc Yeldan
The paper develops a formal model of government's economic decisions as influenced by private agents within the context of neoclassical political economy. The government is assumed to form preferences over interest groups in the economy; in turn these preferences are influenced by the rent seeking behavior of these groups. An open, two-household, two-sector general equilibrium model is constructed to depict an environment in which preference-maximizing (rational) individuals allocate otherwise productive labor to directly unproductive rent...
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