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Rent-Seeking Bureaucracies in a Schumpeterian Endogenous Growth Model : Effects on Human Capital Accumulation, Inequality and Growth

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Luca, SPINESI

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Abstract

Some empirical works from the nineties have shown the existence of a negative relationship between inequality and growth. In this paper I show that the inefficiency of the Public Sector due to agency problems can be a new element that must e considered to explain the negative empirical relationship between inequality and growth. Considering a neo-Schumpeterian endogenous growth model, I envisage the relationship between rent-seeking bureaucracies and both the private market and political authority. I show that the inefficiency of the Public Sector can contribute to widening income inequality and reducing the per-capita output growth rate because of the skills waste in oversight of rent-seeking bureaucracies. Therefore bureaucratic quality can contribute to explaining the long-run negative relationship between inequality and growth. I show that these effects operates mostly in developed countries, where human capital accumulation and technological progress are fundamental engines for growth. Moreover, I show that more costly oversight reduces the consume of each existing product.

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Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2005027.

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Length: 31
Date of creation: 15 Feb 2005
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Handle: RePEc:ctl:louvec:2005027

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Related research
Keywords: technological progress; inequality and growth; asymmetric information; rent-seeking bureaucracies;

Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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  2. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March. [Downloadable!] (restricted)
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