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Institutional Traps and Economic Growth

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  • Gradstein, Mark
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    Abstract

    This paper's point of departure is that low-quality institutions, concentration of political power, and underdevelopment are persistent over time. Its analytical model views an equal distribution of political power as a commitment device to enhance institutional quality thereby promoting growth. The politically powerful coalition contemplates relinquishing of its power, weighing this advantageous consequence against the limit on own appropriative ability that it entails. The possibility of two developmental paths is exhibited: with concentration of political and economic power, low-quality institutions, and slow growth; and a more equal distribution of political and economic resources, high-quality institutions, and faster growth.

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    Bibliographic Info

    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6414.

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    Date of creation: Aug 2007
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    Handle: RePEc:cpr:ceprdp:6414

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    Related research

    Keywords: growth; inequality; institutional quality; political bias;

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    References

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    1. Konstantin Sonin, 2003. "Why the Rich May Favor Poor Protection of Property Rights," Working Papers w0022, Center for Economic and Financial Research (CEFIR).
    2. Lagunoff, Roger, 2009. "Dynamic stability and reform of political institutions," Games and Economic Behavior, Elsevier, vol. 67(2), pages 569-583, November.
    3. Kenneth L. Sokoloff & Stanley L. Engerman, 2000. "Institutions, Factor Endowments, and Paths of Development in the New World," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 217-232, Summer.
    4. Nunn, Nathan, 2007. "Historical legacies: A model linking Africa's past to its current underdevelopment," Journal of Development Economics, Elsevier, vol. 83(1), pages 157-175, May.
    5. Cervellati, Matteo & Fortunato, Piergiuseppe & Sunde, Uwe, 2006. "Consensual and Conflictual Democratization," IZA Discussion Papers 2225, Institute for the Study of Labor (IZA).
    6. Mark Gradstein, 2007. "Inequality, democracy and the protection of property rights," Economic Journal, Royal Economic Society, vol. 117(516), pages 252-269, 01.
    7. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence From a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 678-704, May.
    8. Raghuram G. Rajan & Luigi Zingales, 2006. "The Persistence of Underdevelopment:Institutions, Human Capital or Constituencies?," Working Papers id:447, eSocialSciences.
    9. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
    10. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
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