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Inefficient Rent Seeking Caused by Government's Allocation for Franchise: Institutional Implication By The Result of Empirical Experiment in Classroom

  • Korean Society and Public Administration
  • Abbr : KSPA
  • 2004, 14(4), pp.211-238
  • Publisher : Seoul Association For Public Administration
  • Research Area : Social Science > Public Administration

Park Min Jeong 1

1서울대학교

Accredited

ABSTRACT

Even though the reform based on the New Liberalism and New Public Management has beendone in public part, government still has much authority and discretion to allot franchise in somefields such as deciding the corporation which would do for public construction and which wouldreceive the licence for an huge IT project. That is to say, government has created artificial rent invarious areas. It is so natural for the self-interested people to seek the rent created bygovernment. This rent seeking activity brings about social waste and social inefficiency. In order to reducethis kind of inefficiency, it would be best and ideal that government don't create any artificial rent. However, we know that it would be so hard to arrive like that ideal situation in a short time. If so,how can we do to make efficient rent seeking?With this issue, this study intends to suggest the possibility to reduce social waste cost bychanging the rule of allotting the franchise. When the rule of game has change, the activities ofpeople under the rule are also changed in order to seek their profit or keep their interest. As likethis, the rule how to allot the franchise effects the rent seeking activity. Changed rent seekingactivity also can reach result to change the social waste cost. Through the classroom game, this study prove that different rule can cause different behaviorat rent seeking. In addition, we can find the implications how much the present general rule to allotfranchise is inefficient by comparing other alternative rule such as auction.

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