erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Natural Resources and Endogenous Rent: Rent-seeking Can Divert All Human Resources into Lobbying

Farhad Nili (University of York, UK)
Gabriel Talmain (University of York, UK)

Abstract  

This paper examines the endogenous allocation of human resources between productive activities and rent-seeking in a resource abundant economy where the income from natural resource liquidation is the major source of public revenue. Three regimes can occur: no lobbying activity, coexistence of lobbying and of productive activity, and no productive activity. In the latter case, all income derived from resource extraction that can be subcontracted to some foreign entity. We characterize conditions under which each regime occurs and show that higher the income from natural resources, ceteris paribus, the more likely is the occurrence of a non-productive economy. We explore also how the extent of rent in each regime is determined endogenously by lobbying activity.

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