SOME EMPIRICAL-EVIDENCE ON RENT-SEEKING

We tested for the capture of net gains by winners in rent-seeking comp etitions, using the most prominent announcements of government favors in the Canadian economy over a twelve-year period. Stockholders' retur ns were not significantly different from zero. One possible explanatio n is that government assists firms only when assistance creates politi cal gains. Refusing to transfer economic rents to firms maximmizes the resources available to serve political purposes. This kind of behavio r by government officials would imply that government has market power , which is consistent with several well-known theories of government.