ABSTRACT

Early literature on rent and rent seeking tends to narrowly depict these phenomena as inherently inefficient and growth reducing, and rarely attends to how they may have contributed to positive developmental outcomes. However, an emerging body of political economy literature challenges this narrow perspective on rent and rent seeking. Research by institutional economists provides evidence that certain types of rent can be value enhancing and that rent seeking can produce developmental outcomes. This chapter surveys recent literature on technological change and rent seeking applied to economic development. It highlights the importance of rent creation and rent seeking for economic development. The dual processes of technological change and rent seeking inform not only development theory and practice but also help developing countries understand themselves and their experiences. This theoretical survey suggests that the evolutionary process of economic development and industrialization must include rent management – a combination of incentives and conditions that promote development – to provide due attention to social, political, and economic factors influencing economic transformation.

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