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Self-Serving Dictators and Economic Growth

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  • Daniel Haile
  • Abdolkarim Sadrieh
  • Harrie A. A Verbon

Abstract

A new line of theoretical and empirical literature emphasizes the pivotal role of fair institutions for growth. We present a model, a laboratory experiment, and a simple cross-country regression supporting this view. We model an economy with an unequal distribution of property rights, in which individuals can free-ride or cooperate. Experimentally we observe a dramatic drop in cooperation (and growth), when inequality is increased by a selfserving dictator. No such effect is observed when the inequality is increased by a fair procedure. Our regression analysis provides basic macroeconomic support for the adverse growth effect of the interaction between the degree and the genesis of inequality. We conclude that economies giving equal opportunities to all are not likely to suffer retarded growth due to inequality in the way economies with self-serving dictators will.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1105.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1105

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Keywords: inequality; corruption; weak institutions; growth; intentions; dynamic public goods;

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Cited by:
  1. Haile, Daniel & Sadrieh, Karim & Verbon, Harrie, 2006. "Cross-racial Envy and Underinvestment in South Africa," 2006 Annual meeting, July 23-26, Long Beach, CA 21269, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Ben Greiner & Axel Ockenfels & Peter Werner, 2007. "The Dynamic Interplay of Inequality and Trust - An Experimental Study," Harvard Business School Working Papers 08-026, Harvard Business School.
  3. Ed Hopkins & Tatiana Kornienko, 2005. "Inequality and Growth in the Presence of Competition for Status," Levine's Bibliography 122247000000000554, UCLA Department of Economics.
  4. Bergh, Andreas & Bjørnskov, Christian, 2013. "Trust, Welfare States and Income Equality: What Causes What?," Working Paper Series 994, Research Institute of Industrial Economics.

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