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The Political Economy of Non Convergence

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  • Kanczuk, Fabio

Abstract

I analyze the joint dynamics of distortionary taxation and economic growth in an environment where taxes are set by self-interested kleptocratic politicians competing for electoral success. The incumbent's incentive to appropriate resources is tempered by a desire to get reelected which would allow him to steal in future periods. Weak electoral control (or high agency costs) is consistent with "distortion-liberalization cycles" - oscillatory movements in economic activity - and also with endogenous "political risk", which reduces private investment. Agency costs can therefore account for permanent differences in international growth rates and for the phenomenon of conditional "non-convergence".

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  • Kanczuk, Fabio, 2000. "The Political Economy of Non Convergence," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 20(2), November.
    • Handle: RePEc:sbe:breart:v:20:y:2000:i:2:a:2756
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