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Internal versus External Rent-Seeking with In-Group Inequality and Public Good Provision

Author

Listed:
  • Bakshi, Dripto

    (Indian Statistical Institute)

  • Dasgupta, Indraneel

    (Indian Statistical Institute)

Abstract
We examine how inequality in the endowment of secure wealth, mediated through voluntary public good provision, affects rent-seeking within and between groups. We model a scenario where two communities, each internally differentiated into rich, intermediate and poor segments, contest one another for the division of some rent. Any rent accruing to a community is distributed internally according to another, simultaneous, contest. Individuals first decide how much of their endowments to allocate to the two contests. They subsequently decide how to allocate their remaining wealth and rental income between private consumption and a community-specific public good. We find that greater endowment inequality among the non-rich, both within and across communities, aggravates inter-group rent-seeking. Within-group rent-seeking may rise as well. In contrast, higher such inequality between the rich and others within a community depresses between-group conflict. Within-group conflict may fall as well. The ‘paradox of power’ is violated for both kinds of conflict – better-endowed individuals are more successful in the internal conflict, while better-endowed groups are more successful in the external conflict.

Suggested Citation

  • Bakshi, Dripto & Dasgupta, Indraneel, 2021. "Internal versus External Rent-Seeking with In-Group Inequality and Public Good Provision," IZA Discussion Papers 14871, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14871
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    References listed on IDEAS

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    More about this item

    Keywords

    internal v. external rent-seeking; ethnic conflict; intra-group inequality; inter-group inequality; public good provision;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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