Rent-seeking, Transaction Costs And Economic Growth

Since the reform and opening up policy were made, with chinese comparative advantage of lower cost in labor force and enhanced by chinese government’s policies,more and more enterprises along the coast have participated in international division of labor;and more FDI have been attracted to china. That have promoted chinese economy’s a lot.China’s GDP have been growing at a high speed for years and now china is the second largest economy in the world.However, There’s also some problems in china’s economic growth:gap beteew rich and poor are found between areas,betwwen urban and rural and the gap has a trend to become bigger;china’s economic growth basically relies on export and investment while its consumption is insufficient and so onThese problems has been a hinder for chinese economy’s further up growth.By learning the literature of economic growth thoeries,rent-seeking and the model of labor force market,this paper tries to bring the problems of china’s economic growth to the framework of evolution of division of labor.We plan to achieve this goal by:l,using xiaokai yang’s model to check the affect of rent-seeking to transaction costs of the economy;2,using rent-seeking theories and mortensen’s labor force market model to check the effect of rent-seeking behaviour to the matching costs of labor for market3、K is the key variables which influencing the evolution of the division of labor and the economic growth;4、finding some relations among the above three theories;thus to find that taxation lower the trading efficiency,public rent-seeking will lead to more unemployment.there’s two features of china’s economy:1,government intervention is strong and there’s too much national assets.thus rent-seeking is more easily to happen.policy suggestion of this paper are as follows:1,there should be less government intervention if it is not possible;2, developing better govern mechanisms to avoid the run off of the national assets;3,when it is possible,reduce taxation.