Rent seeking and the excess burden of taxation

Nava Kahana, Doron Klunover

Research output: Contribution to journalArticlepeer-review

7 Scopus citations

Abstract

The social costs of rent seeking and the excess burden of taxation have been studied and evaluated independently. We show that, when rent seekers earn taxable income, there is interdependence between the two types of social losses. Rent seeking increases the excess burden of taxation under risk neutrality when leisure is non-inferior. We derive a condition for rent seeking to increase the excess burden of taxation under risk aversion. When rent seekers can earn taxable income, rent seeking is more socially costly than is inferred from contest models alone, because of an increased excess burden of taxation.

Original languageEnglish
Pages (from-to)158-167
Number of pages10
JournalEuropean Journal of Political Economy
Volume35
DOIs
StatePublished - Sep 2014
Externally publishedYes

Keywords

  • Excess burden of taxation
  • Rent seeking
  • Size of government
  • Welfare cost of taxation

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