The impact of rent-seeking on economic growth in the six geographic regions: Evidence from static and dynamic panel data analysis

Abstract

This paper empirically investigates the impact of rent-seeking on economic growth by introducing an augmented Solow growth model over the period 2010-2015. Static and dynamic panel regression models are employed to investigate this impact for the six geographic regions, namely, Sub-Saharan Africa, East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, and South Asia according to the World Bank's classification. Results reveal that the impact of control for rent-seeking on economic growth is found highly significant and positive for most of the regions however, no significant effect could detect on the control for rent-seeking on economic growth for advanced economies. Results also show that there exists mixed evidence between gross fixed capital as a percentage of gross domestic product, Employment ratio and economic growth for the six geographic regions. The results can be interpreted in favour of the advanced economies that they can relatively handle the rent-seeking problem compared to the relatively weak economies due to much better political and economic stability, better administrative mechanism, stronger law system, more adequate public services, better health, and education system as well as more advanced infrastructure.