Effects of Rent-Seeking on Economic Growth in Low-Income Economies

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.

The Effects of Rent Seeking Activities on Economic Growth in Middle-Income Countries

“…While a negative relationship between rent-seeking and economic growth is found in the case of MICs, it is also applicable in the context of LICs (Wong, Chen and Yiew, 2021;Saha and Ali, 2017) in which a high level of corruption creates a big problem. However, if these countries (including some of the middle eastern and North African (MENA) countries), characterized by diverse ethnic groups as well as instable politics, is given a chance to have higher political freedom and minimum ethnic tension, corruption could be reduced, hence promoting economic development (Saha and Ali, 2017).…”

Specifics of Public Administration in Countries With a Developed Energy Sector: The Case Study

“…Table 1 provides an overview of the works on the subject under consideration, which reflect the key negative manifestations, as well as negative macroeconomic and sectoral consequences. Supporters of the ''concept of the rental state'' (Kimelman, 2011;Mahdavy, 1970;Oludimu & Alola, 2022;Onifade, 2022;Wong et al, 2021). The focus was on role of rental income.…”

“…Supporters of the “concept of the rental state” (Kimelman, 2011; Mahdavy, 1970; Oludimu & Alola, 2022; Onifade, 2022; Wong et al, 2021). The focus was on role of rental income.…”

Rent-Seeking Towards Economic Growth: Empirical Study in Lower-Middle-Income Countries

“…The elevated information and communication technology leads to the shrinking world and the disappearance of the country's borders (Hermawanto and Anggrani, 2020). The world has become a borderless place that could accelerate and expand the access to capital and the global market through technology that makes the economic growth in a different condition compared to twenty years ago (Wong, et al, 2021). On the other hand, not every country experiences significant improvement, especially the lower-income countries.…”

“…Eventually, the existence of rent-seeking in the economy is a sign of poor institution quality (Ugur and Dasgupta, 2011). It is a challenge that should be dealt with by lower-middle-income countries that needs process reconsideration, involving the entire components to design and implement the policies that uphold the quality of institutions to fight the activities of rent-seeking (Auriol, 2006in Wong, et al, 2021.…”