TY - JOUR
T1 - Rent seeking and the excess burden of taxation
AU - Kahana, Nava
AU - Klunover, Doron
PY - 2014/9
Y1 - 2014/9
N2 - 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.
AB - 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.
KW - Excess burden of taxation
KW - Rent seeking
KW - Size of government
KW - Welfare cost of taxation
UR - http://www.scopus.com/inward/record.url?scp=84903695290&partnerID=8YFLogxK
U2 - 10.1016/j.ejpoleco.2014.06.003
DO - 10.1016/j.ejpoleco.2014.06.003
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AN - SCOPUS:84903695290
SN - 0176-2680
VL - 35
SP - 158
EP - 167
JO - European Journal of Political Economy
JF - European Journal of Political Economy
ER -