Wealth constraints, lobbying and the e$ciency of public allocation
نویسندگان
چکیده
In Esteban and Ray (1999, Inequality public allocation and development, Mimeo.) we formalize a model in which individuals lobby before the government in order to bene"t from some productivity-enhancing government action (infrastructures, direct subsidies, permissions, in short). The government honestly tries to allocate these permissions to the agents that will make the best use of them, as revealed by the intensity of their lobbying. If the marginal cost of resources varies with wealth, the amount of information transmitted through lobbying will depend on the degree of inequality. In this paper, we summarize the main approach and examine the special case of equal wealth. We show that the nature of signaling equilibria is critically a!ected by per-capita wealth. ( 2000 Elsevier Science B.V. All rights reserved. JEL classixcation: O20; H50; D61; D31; C72
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The ratio in [A.3′] is the factor increase in the cost by an increase in the bidding expenditure by a factor of δ > 1. As wealth increases both costs decrease. Our assumption simply posits that the cost at the higher level of bidding does not fall faster than the lower cost. In particular, this assumption excludes the possibility that the costs of expending δr and r tend to converge to each oth...
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