Entrepreneurship, rent-seeking spillovers and decreasing returns: A microeconomic approach

Infante, D. and Smirnova, J. (2009) Entrepreneurship, rent-seeking spillovers and decreasing returns: A microeconomic approach. Acta Oeconomica, 59 (1). pp. 79-89. ISSN 0001-6373

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Abstract

The lack of a strong local entrepreneurial activity and the presence of a flourishing rent-seeking sector are two of the major issues raised when debating on developing and transition countries. We claim that the allocation of entrepreneurs between productive and rent-seeking sectors is mainly determined by the reward structure that prevails in both sectors. The introduction of a rent-seeking spillover factor permits to demonstrate that the entrepreneurs involved in production activities may find it convenient to switch to unproductive ones, when the production method operates under decreasing returns.

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