chapter: Rent, Rent-Seeking, and Social Inequality


Rent

The compensation paid out to workers reflects: (a) the value of their contribution to the firm or organization; and (b) a possible premium because of restrictions on competition. The latter restrictions, which may take the form of corruption or monopolies that preclude labor from freely flowing throughout the economy, allow for extraction of various types of rent. This article addresses the way rents are created, the sectors of the labor market that are gaining new opportunities to extract rent, and the sectors that are losing the capacity to extract. Although it is typically argued that all forms of rent are gradually withering away, the available evidence suggests, to the contrary, that rent destruction is mainly occurring at the bottom of the class structure. At the top of the class structure, new opportunities to collect rent appear to be emerging, a process that raises earnings among the already-privileged and thus increases income inequality. The foregoing characterization of the evidence, although not without support, is necessarily controversial, because of intrinsic difficulties in distinguishing the true marginal contribution of workers from returns that are attributable to market failure. « Read It »

2015. Red Bird, Beth, & David B. Grusky. “Rent, Rent-Seeking, and Social Inequality”, in Emerging Trends in the Social and Behavioral Sciences, edited by Robert Scott and Stephen Kosslyn. Hoboken, NJ: John Wiley and Sons.