Rent-Seeking and the Privatization of the Commons

In this paper a small two sector model is developed and used to analyze the private versus common property debate in the presence of resource-using rent-seeking. We are able to demonstrate that, in contrast to the existing literature, there may be a gain associated with privatization even when rent-seekers spend all the scarcity rent on the lobbying activity. We also challenge the traditional result which states that privatization will necessarily lead to a reduction in the rate of renumeration to the mobile factor.