Rent seeking

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Rent seeking increases the cost and price of many goods and services due to laws or regulations which favor owners or producers of productive inputs. Zoning and urban or rural planning are common mechanisms as are statutes which prohibit or limit entry into the field.

Subsidies

Agricultural products may be heavily subsidized. Thus they may be available on the local or world market at a much lower price than their cost, and producers may receive as a subsidy profit in addition to recovery of the difference between their cost and the market price.

Subsidized goods and services which move in world trade in large volumes can have destructive effects when they lower prices in the world market below local costs in countries which do not subsidize their producers. Thus the flood of cheap subsidized agricultural products which entered Mexico after NAFTA resulted in serious problems for local peasant farmers. Likewise a flood of cheap steel from Chinese mills which receive cheap credit from the state for expansion of their plants may overwhelm steel producers in other countries. Anti-dumping regulation may provide a partial and tardy remedy.

Notes and references