English, Article, Journal or magazine article edition: Informality and rent-seeking bureaucracies in a model of long-run growth Pierre-Daniel G. Sarte

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Informality and rent-seeking bureaucracies in a model of long-run growth
Author
  • Pierre-Daniel G. Sarte
Physical Description
  • preprint
Notes
  • This paper explores the links among growth, the informal economy, and rent-seeking bureaucracies. The presence of congestion associated with the enforcement of property right implies that informality can be useful. Whether bureaucratic rent-seeking is detrimental to growth then depends on how good a substitute informality is to production in the formal sector. In order to create profits which can be appropriated, rent-seeking bureaucrats limit entry into the formal economy. As a result, firms operate in the informal sector even when the cost of informality is high, in which case lower growth emerges. However, when the cost of informality is low, a large number of firms choose to operate informally irrespective of entry conditions. In the latter case, growth is unaffected by a rent-seeking bureaucracy as entry restrictions in the formal economy do not bind.
  • Rent
  • RePEc:fip:fedrwp:99-07
Language
  • English
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