Rent-seeking is a ubiquitous phenomenon in economic development. Turning its roots, we find that a crucial reason of rents and rent-seeking is scarcity of resources. In order to distribute or capture the resources, market mechanism is distorted by some political activities resulted from some institution or culture. In rents-setting and rents-seeking, interest parties not only include,as traditional views hold it, government and enterprises but also include the central government and local governments as a result of uneven spatial distribution of scare resources. Further, it's uneven spatial distribution of the resources that lead to spatial unbalance in economic development. As such, spatial preference of the central government policies always give some local government special advantages to promote its development. The special advantages, in fact, are extra benefits we call "institution-based rents". For its own development, each local government tries its best to gain the extra benefits, which gives rise to rent-setting and rent-seeking between governments. We will explore in this paper,taking China as an example, the way and mechanism which form institution-based rents,and further will study the effect of institution-based rents on regional development.