EFFECTS OF RENT-SEEKING ON ECONOMIC GROWTH IN LOW-INCOME ECONOMIES

• Main Authors: Zi Wen Vivien Wong, Fanyu Chen, Thian Hee Yiew
• Format: Article
• Language: Indonesian
• Published: Bank Indonesia 2021-06-01
• Series: Bulletin Ekonomi Moneter dan Perbankan
• Subjects: rent-seeking; economic growth; system generalized method of moments estimator; low-income countries
• Online Access: https://www.bmeb-bi.org/index.php/BEMP/article/view/1386

Sluggish growth in low-income countries, despite the high performance in other economic indicators, motivates the literature to switch attention to institutions. Despite its crucial economic implications, there is limited attention on rent-seeking as a driver of economic growth in low-income countries. This paper investigates the effect of rent-seeking on growth in low-income countries from 2004 to 2017using the system generalized method of moments estimator. The empirical results reveal that rent-seeking negatively affects growth, implying that it obstructs the pace of economic development in low-income countries. Hence, it is necessary for policymakers in these countries to adopt anti-rent-seeking policies to promote a rapid and sustainable growth.