Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/33698 
Year of Publication: 
2006
Series/Report no.: 
IZA Discussion Papers No. 2391
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
This paper discusses the optimal firm size in the presence of influence activities, and the level of individual rent-seeking dependent on the economic situation of the firm. Since firm size has a discouraging effect on the level of individual rent-seeking but also a quantity effect as the number of rent-seekers increases, the interplay of both effects determines whether the employer chooses an inefficiently small or large firm size. In the given setting, a bad economic situation leads to both a higher probability of a substantial loss and a reduction of productivity. The productivity effect and the two other effects together determine the optimal level of individual rent-seeking.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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