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Prosperity without conflict

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Author Info

  • Gonzalez, Francisco M.
  • Neary, Hugh M.

Abstract

Social conflict and slow growth are features of many developing economies. This paper considers the role institutions of property rights and conflict management can play in both achieving prosperity and mitigating conflict in these economies. We study how introducing conflict over economic distribution into an otherwise standard model of growth can shape optimal (second-best) taxation policy when diversionary activities cannot be taxed. In this context, we find that the maximization of economic efficiency may call for a reduction in growth in order to mitigate the problem of diversion, even though the economy's growth is inefficiently slow in the absence of taxation. This is so when institutional quality is sufficiently poor, but not otherwise. The paper warns against the conventional justification of growth-promoting policies on efficiency grounds independently of institutions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 10-11 (October)
Pages: 2170-2181
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Handle: RePEc:eee:pubeco:v:92:y:2008:i:10-11:p:2170-2181

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Web page: http://www.elsevier.com/locate/inca/505578

For corrections or technical questions regarding this item, or to correct its listing, contact: (Jeroen Loos).

Related research

Keywords: Second best Optimal taxation Growth Insecure property Conflict Diversion;

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Citations

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Cited by:
  1. Andreas Irmen & Johanna Kuehnel, 2011. "Property rights, optimal public enforcement, and growth," CREA Discussion Paper Series 11-18, Center for Research in Economic Analysis, University of Luxembourg.
  2. David M. Bruner & Robert J. Oxoby, 2009. "Can Foreign Aid Buy Investment? Appropriation Through Conflict," Working Papers 09-06, Department of Economics, Appalachian State University.
  3. Rowthorn, Robert & Seabright, Paul, 2010. "Property Rights, Warfare and the Neolithic Transition," IDEI Working Papers 654, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. J. Amegashie, 2011. "Incomplete property rights and overinvestment," Social Choice and Welfare, Springer, vol. 37(1), pages 81-95, June.
  5. J. Atsu Amegashie, 2009. "Incomplete Property Rights and Overinvestment," CESifo Working Paper Series 2711, CESifo Group Munich.
  6. Hoffmann, Magnus & Rota Graziosi, Gregoire, 2010. "Endogenous Timing in General Rent-Seeking and Conflict Models," MPRA Paper 24084, University Library of Munich, Germany.

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