question archive Government intervention to reduce inequality might reduce growth rates because of rent-seeking behavior
Government intervention to reduce inequality might reduce growth rates because of rent-seeking behavior
Subject:EconomicsPrice:2.88 Bought3
Government intervention to reduce inequality might reduce growth rates because of rent-seeking behavior. This means that
a. Landlords might raise rental rates on housing in order to pay the higher taxes that go with government wealth redistribution programs.
b. Groups who are not among the neediest might put pressure on government officials to obtain the transfer of wealth.
c. People who are not homeowners, but reside in rental housing, may become unmotivated and work less, reducing payments to landlords and slowing real estate markets.
d. As a large fraction of the population falls below the poverty line they are pushed out of homeownership and into rental housing, reducing the savings rate.
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The correct answer is C.
Groups who are not among the neediest might put pressure on government officials to obtain the transfer of wealth.
Rent-seeking behavior refers to the expenditure of money on lobbying for subsidies from the government or imposing regulations on competitors for the purpose of increasing the market share. It is detrimental to the growth of the economy through the reduction of competition and innovation. Summarily, rent-seeking behavior diverts resources from productive use that could be more beneficial.
