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American Economic Review: Vol. 96 No. 1 (March 2006)
AER Volume. 96, Issue 1 | 
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Inequality, Lobbying, and Resource Allocation
Article Citation
Esteban, Joan, and
Debraj Ray. 2006. "Inequality, Lobbying, and Resource Allocation."
The American Economic Review,
96(1): 257-279.
DOI: 10.1257/000282806776157533
DOI: 10.1257/000282806776157533
Abstract
This paper describes how wealth inequality may distort public resource allocation. A government seeks to allocate limited resources to productive sectors, but sectoral productivity is privately known by agents with vested interests in those sectors. They lobby the government for preferential treatment. The government—even if it honestly seeks to maximize economic efficiency—may be confounded by the possibility that both high wealth and true economic desirability create loud lobbies. Broadly speaking, both poorer economies and unequal economies display greater public misallocation. The paper warns against the conventional wisdom that this is so because such governments are more "corrupt."
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Authors
Esteban, Joan
Ray, Debraj
Ray, Debraj
