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Democracy, Rent Seeking, Public Spending And Growth

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Author Info
Mohtadi, Hamid
Roe, Terry

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Abstract

Does democratization imply faster growth, less corruption and less inefficiency? Past studies yield ambiguous results on the effects of democracy on economic performance and growth. We develop a simple two-sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization, producing a 'U' effect. This effect results from the pattern of rent seeking as it diverts from the provision of public goods. Rent-seekers act as monopolistic competitors. Initially, more democracy increases their number, raising aggregate rents. However, rents per rent-seeker fall with the number of rent seekers, aggregate rents fall in mature democracies. Thus, rents show an 'inverted-U' effects in relation to domocracy. We find fairly robust supportive evidence for the latter.

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Paper provided by University of Minnesota, Economic Development Center in its series Bulletins with number 12981.

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Date of creation: 2001
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Handle: RePEc:ags:umedbu:12981

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Keywords: Political Economy;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September. [Downloadable!] (restricted)
  2. Przeworski, Adam & Limongi, Fernando, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer. [Downloadable!] (restricted)
  3. Rama, Martin, 1993. "Rent seeking and economic growth : A theoretical model and some empirical evidence," Journal of Development Economics, Elsevier, vol. 42(1), pages 35-50, October. [Downloadable!] (restricted)
  4. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September. [Downloadable!] (restricted)
  5. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August. [Downloadable!] (restricted)
  6. Daron Acemoglu & James Robinson, 1999. "Democratization or Repression?," Working papers 99-27, Massachusetts Institute of Technology (MIT), Department of Economics.
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  7. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May. [Downloadable!] (restricted)
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  8. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
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  9. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 503-30, May. [Downloadable!] (restricted)
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  10. Scully, Gerald W, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 652-62, June. [Downloadable!] (restricted)
  11. Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
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  1. Konstantinos Angelopoulos & Apostolis Philippopoulos & Vanghelis Vassilatos, 2007. "Rent-seeking competition from state coffers in a calibrated DSGE model of the euro area," Working Papers 2007_29, Department of Economics, University of Glasgow. [Downloadable!]
  2. Evan Osborne, 2006. "Corruption and Technological Progress: A Takeoff Theory of Good Governance," Atlantic Economic Journal, International Atlantic Economic Society, vol. 34(3), pages 289-302, September. [Downloadable!] (restricted)
  3. Guillaume R. Fréchette, 2006. "Panel Data Analysis of the Time-Varying Determinants of Corruption," CIRANO Working Papers 2006s-28, CIRANO. [Downloadable!]
  4. Konstantinos Angelopoulos & Apostolis Philippopoulos, 2005. "The Role of Government in Anti-Social Redistributive Activities," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Konstantinos Angelopoulos & George Economides, . "Fiscal Policy, Rent Seeking and Growth under Electoral Uncertainty Theory and Evidence from the OECD," Working Papers 2007_28, Department of Economics, University of Glasgow, revised Apr 2008. [Downloadable!]
    Other versions:
  6. Roe, Terry, 2003. "Markets, Trade And The Role Of Institutions In African Development," Conference Papers 28069, University of the Free State, Department of Agricultural Economics. [Downloadable!]
  7. George Economides & Sarantis Kalyvitis & Apostolis Philippopoulos, 2008. "Does foreign aid distort incentives and hurt growth? Theory and evidence from 75 aid-recipient countries," Public Choice, Springer, vol. 134(3), pages 463-488, March. [Downloadable!] (restricted)
  8. Michael T. Rock, 2007. "Corruption and Democracy," Working Papers 55, United Nations, Department of Economics and Social Affairs. [Downloadable!]
  9. Evan Osborne, 2004. "Corruption and Its Alternatives: A Takeoff Theory of Good Governance," ISER Discussion Paper 0604, Institute of Social and Economic Research, Osaka University. [Downloadable!]
  10. Konstantinos Angelopoulos & Apostolis Philippopoulos & Vanghelis Vassilatos, 2006. "Rent-Seeking Competition from State Coffers: A Calibrated DSGE Model of the Euro Area," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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