Rent-Seeking Induced Inequality Traps

Does inequality affect rent-seeking and vice-versa? Social scientists have argued that inequality fosters rent-seeking and that rent-seeking is likely to reinforce existing inequalities. In this paper, I model rent-seeking in an unequal endowment economy to analyze the conditions under which an inequality trap would exist. I find that, in the short-run, a more unequal economy fosters a greater proportion of rentiers which in turn perpetuates existing inequities. In the long-run, as rentiers are able to change the rules of the game, the proportion of rentiers shrinks. However, both the amount of rents and ex-post inequality increase