The Size of Rent-seeking Activity in Iran's Foreign Trade Sector: An Application of the DSGE Approach

Rent-seeking in the trade sector is an outcome of restrictions imposed on tariffs and import quotas by a government. in an effort to acquire more privilege in foreign trade, labor allocates a part of its time-effort to rent-seeking activity, while cutting down on production work. given the importance of rent-seeking activity due to restrictions imposed by the government in the iranian economy, this paper has attempted to calculate the size of rent-seeking activity in the foreign trade sector of the iranian economy. hence, a version of the dsge model has been specified and the related parameters have been estimated in order to calculate the rent-seeking rate. we have applied quarterly data from 1998:1 to 2015:4 for iran’s trade sector, to obtain the empirical results through calibrating the specified dsge model. the results have indicated that rent-seeking of iran’s trade sectors amounted to 0.45, which looks considerably high. moreover, labor has shared 24 % of its effort time to rent-seeking activity and 76 % to ordinary work.