From Rent Seeking to Human Capital: A Model where Resource Shocks Cause Transitions from Stagnation to Growth

Reprint No. 2008:14

Author(s): Nils-Petter Lagerlöf and Thomas TangeråsYear: 2008 Title: Canadian Journal of Economics Volume (No.): 41 (3) Pages: 760–780

We present a growth model where agents divide time between rent seeking in the form of resource competition and working in a human capital sector. The latter is interpreted as trade or manufacturing. Rent seeking exerts negative externalities on the productivity of human capital. Adding shocks, in the formof fluctuations in the size of the contested resource, the model can replicate a long phase with stagnant incomes and high levels of rent seeking, interrupted by small, failed growth spurts, eventually followed by a permanent transition to a sustained growth path where rent seeking vanishes in the limit. The model also generates a rise and fall of the so-called natural resource curse: before the takeoff, an increase in the size of the contested resource has a positive effect on incomes; shortly after the takeoff, the effect is negative; and on the balanced growth path the growth rate of per capita income is independent of resource shocks.

Lagerlöf, Nils-Petter and Thomas Tangerås (2008), "From Rent Seeking to Human Capital: A Model where Resource Shocks Cause Transitions from Stagnation to Growth". Canadian Journal of Economics 41(3), 760–780.

Thomas Tangerås


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