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This variant of coordination problem seeks the answer to why some countries fail to grow when public and private rent seeking makes property rights insecure. One reason is that rent seeking, especially by the governments officials are likely to hurt innovative activities: when returns to rent seeking relative to innovation increases. This may give rise to multiple equilibrium. Then in one equilibrium, fraction, and returns of innovations is low and because fraction of rent seeks is high. But simultaneously there is another equilibrium at which the opposite is the case.
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Suppose there are two inputs in the production function, labor (L) and capital (K), which can be combined to produce Y units of output according to the following production functio
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how wage increase of fixed income groups'' will affect the overall economy? what are effects exactly?
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