We model firms' allocation of resources between surplus-creating (a.k.a., productive) and surplus-appropriating (a.k.a., rent-seeking) activities. We show that industry-wide technological advancements, such as the recent progress in the collection and processing of big data, induce a disproportionate and socially inefficient reallocation of resources towards surplus appropriation, even when the associated productivity gains are far larger for surplus-creating activities than for surplus-appropriating activities. As technology improves,...

We propose a model of strategic debt renegotiation in which businesses are sequentially interconnected through their liabilities. This financing structure, which we refer to as a debt chain, gives rise to externalities, as a lender's willingness to provide concessions to its privately-informed borrower depends on how the lender's own liabilities are expected to be renegotiated. Our analysis reveals how government interventions that aim to prevent...