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Rent Preservation and the Persistence of Underdevelopment

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  • Raghuram G. Rajan

Abstract

When citizens in a poor constrained society are unequally endowed, they are likely to find it hard to agree on reforms, even though the status quo hurts them collectively. Each citizen group or constituency prefers reforms that expand its opportunities, but in an unequal society, this will typically hurt another constituency's rents. Competitive rent preservation ensures no comprehensive reform path may command broad support. The roots of underdevelopment may therefore lie in the natural tendency toward rent preservation in a divided society. (JEL D72, O10, O17)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 1 (2009)
Issue (Month): 1 (January)
Pages: 178-218

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Handle: RePEc:aea:aejmac:v:1:y:2009:i:1:p:178-218

Note: DOI: 10.1257/mac.1.1.178
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  1. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 49(04), pages 803-832, December.
  2. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, Elsevier, vol. 72(2), pages 603-633, December.
  3. Karla Hoff, 2003. "Paths of Institutional Development: A View from Economic History," World Bank Research Observer, World Bank Group, World Bank Group, vol. 18(2), pages 205-226.
  4. Binswanger, Hans P. & Deininger, Klaus, 1997. "Explaining agricultural and agrarian policies in developing countries," Policy Research Working Paper Series 1765, The World Bank.
  5. Avinash Dixit & John Londregan, 1998. "Ideology, Tactics, And Efficiency In Redistributive Politics," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(2), pages 497-529, May.
  6. Abhijit Banerjee & Lakshmi Iyer, 2005. "History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India," American Economic Review, American Economic Association, American Economic Association, vol. 95(4), pages 1190-1213, September.
  7. Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262661926, December.
  8. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, number marshall1890.
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Cited by:
  1. Nauro Campos & Fabrizio Coricelli, 2010. "Financial Liberalization, Elite Heterogeneity and Political Reform," PSE - G-MOND WORKING PAPERS, HAL halshs-00967428, HAL.
  2. Devarajan, Shantayanan & Khemani, Stuti & Walton, Michael, 2011. "Civil Society, Public Action and Accountability in Africa," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp11-036, Harvard University, John F. Kennedy School of Government.
  3. Oded Galor, 2011. "Inequality, Human Capital Formation and the Process of Development," Working Papers 2011-7, Brown University, Department of Economics.
  4. Enrico Perotti, 2013. "The Political Economy of Finance," Tinbergen Institute Discussion Papers 13-034/IV/DSF53, Tinbergen Institute.
  5. Thomas Gall & Paolo Masella, 2012. "Markets and jungles," Journal of Economic Growth, Springer, Springer, vol. 17(2), pages 103-141, June.
  6. Andreas Madestam, 2009. "Informal Finance: A Theory of Moneylenders," Working Papers, Fondazione Eni Enrico Mattei 2009.69, Fondazione Eni Enrico Mattei.
  7. Campos, Nauro F & Coricelli, Fabrizio, 2009. "Financial Liberalization and Democracy: The Role of Reform Reversals," IZA Discussion Papers 4338, Institute for the Study of Labor (IZA).
  8. Raghuram G. Rajan & Rodney Ramcharan, 2011. "Land and Credit: A Study of the Political Economy of Banking in the United States in the Early 20th Century," Journal of Finance, American Finance Association, American Finance Association, vol. 66(6), pages 1895-1931, December.
  9. Oded Galor, 2009. "Inequality and Economic Development: An Overview," Working Papers 2009-3, Brown University, Department of Economics.
  10. repec:hal:pseose:halshs-00967428 is not listed on IDEAS
  11. Chaudhary, Latika & Rubin, Jared, 2011. "Reading, writing, and religion: Institutions and human capital formation," Journal of Comparative Economics, Elsevier, vol. 39(1), pages 17-33, March.
  12. repec:hal:cesptp:halshs-00967428 is not listed on IDEAS

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