The Welfare Consequences of Directly Unproductive Profit-Seeking (DUP) Lobbying Activities: Price versus Quantity Distortions

Bhagwati, Jagdish N.; Srinivasan, T. N.

This paper is a contribution to the growing literature on the theory of what Bhagwati (1982) has christened the theory of DUP activities. These are activities that use up real resources in making profits (i.e., income) without producing directly or indirectly a "good." They result therefore in the contraction of the availability set defined on goods. For one generic subset of such DUP activities, namely distortion-triggered lobbying activities, the paper establishes asymmetrical propositions on the possibility of such DUP lobbying resulting in a paradoxical improvement of welfare.



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Journal of International Economics

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January 31, 2013