A rent or transfer is politically contestable when policy decisions are subject to influence by potential beneficiaries and losers. This paper studies contestablility of rents and transfers when contenders place different valuations on the politically allocated prize. Asymmetric valuation inhibits participation by low-valuation contenders. The model explains the phenomena of small numbers of active participants in contests to exercise political influence and low lobbying and other influence-seeking outlays relative to the value of politically allocated prizes. INTRODUCTIONMARKET MECHANISMS allocate resources and, via relative scarcity and associated factor claims, determine individuals' incomes. Political mechanisms likewise give rise to allocative outcomes which affect incomes. In particular, a substantial and historically increasing pan of the activity of government has involved the transfer of income from one group in society to another.' Government policies can also be the source of rents, secured for example by the industry-specific factors who are the beneficiaries of protection, or by the residual claimants in firms which are the beneficiaries of protectionist policies and of regulation.2 The income transfers and the rents which result from policy decisions are often contestable via influence over political allocation mechanisms rather than preassigned to designated beneficiaries. The cost of interventionist policies then includes, in addition to whatever associated allocative inefficiency, the resources used in seeking to influence political allocation.Measurement of the standard allocative inefficiency costs of intervention can proceed in a well-known manner by appropriate evaluation of the Harberger triangle^.^ The informational requirements for computing the triangles are stringent, but not overly so given the requirements of applied economic research. One needs to know market demand and supply elasticities (preferably compensated), and the values of market transactions.Measurement of the additional value of resources used in contesting politically allocated transfers and rents tends to be hindered by lack of direct observations on values of outlays and prize^.^ * The comments and suggestions of John McMillan, Steve Salop, Gordon Tullock and especially Joel Sobel are gratefully acknowledged.

A rent or transfer is politically contestable when policy decisions are subject to influence by potential beneficiaries and losers. This paper studies contestablility of rents and transfers when contenders place different valuations on the politically allocated prize. Asymmetric valuation inhibits participation by low-valuation contenders. The model explains the phenomena of small numbers of active participants in contests to exercise political influence and low lobbying and other influence-seeking outlays relative to the value of politically allocated prizes. Copyright 1989 Blackwell Publishers Ltd..

No abstract

No abstract