Abstract
In this paper, we examine the relationship between initial wealth and occupational choice between rent seeking and productive activities. Rent seeking refers to all largely unproductive, expropriative activities that bring positive return to the individual but not to society (Krueger, 1974). The allocation of resources to rent seeking affects aggregate economic activity in several ways. First, to the extent that rent seeking activities, such as corruption and tax farming, lower incentives and opportunities for production and investment, aggregate economic activity is reduced.1 Second, rent seeking can compete with productive sectors for scarce economic resources, resulting in a misallocation of labor, capital, and talent in the economy.
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