Parties as efficiency-improving gatekeepers in rent-seeking societies

• We analyze rent-seeking with and without political parties.
• Rent-seekers can pay for being linked even when they cannot pay directly for spoils.
• With anti-corruption laws, rent-seeking results in excessive networking.
• Political parties can improve efficiency by limiting network formation.
• The presence of political parties may also reduce welfare.

Anti-corruption laws forbid selling public job nominations. Even if bribing is ruled out, those interested in the nominations may invest in good relationships with the nominators. This provides a legal way to influence the decision. Such networking is costly, however. Thus, rent-seeking results in excessive networking. We present a simple model featuring such effects and show that efficiency may be improved if political parties interfere with the nominations. Political parties may reduce wasteful networking, thanks to exclusive membership contracts. Parties can require that politicians belonging to the party promote the nomination of other party members, thus, reducing incentives to cultivate inter-party connections.