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On the political economy of a backward region

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  • Abhirup Sarkar
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    Abstract

    Purpose – The purpose of this paper is to develop a political economy model for a less developed region where a significantly large number of people belonging to the informal sector depend on political favours for their survival due to ill-defined property rights. The purpose is to show that in such a scenario, democracy and political competition might lead to economic stagnation. Design/methodology/approach – The arguments in the paper are represented in terms of a theoretical model. Findings – The central result is that the party with a better political organization will have the incentive to maximize the size of the informal sector, which will also maximize its probability of winning. In equilibrium this party choosing anti-development policies will have a higher probability to be in power. Thus universal franchise may lead to inefficiencies in such economies. These inefficiencies stem from ill-defined property rights in the informal sector. Originality/value – This paper is an original contribution to the class of political economy models of less developed countries.

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    File URL: http://www.emeraldinsight.com/journals.htm?issn=1753-8254&volume=3&issue=2&articleid=1886336&show=abstract
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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Indian Growth and Development Review.

    Volume (Year): 3 (2010)
    Issue (Month): 2 ( October)
    Pages: 122-137

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    Handle: RePEc:eme:igdrpp:v:3:y:2010:i:2:p:122-137

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    Related research

    Keywords: Developing countries; Economic growth; India; Political economy; Property rights;

    References

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    1. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
    2. Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
    3. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659 Elsevier.
    4. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
    5. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
    6. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
    7. Torsten Persson & Guido Tabellini, 1997. "Political Economics and Macroeconomic Policy," NBER Working Papers 6329, National Bureau of Economic Research, Inc.
    8. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 265-86, April.
    9. Philip Keefer, 2005. "Democracy, Public Expenditures, and the Poor: Understanding Political Incentives for Providing Public Services," World Bank Research Observer, World Bank Group, vol. 20(1), pages 1-27.
    10. Keefer, Philip & Khemani, Stuti, 2003. "Democracy, public expenditures, and the poor," Policy Research Working Paper Series 3164, The World Bank.
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