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Self-Serving Dictators and Economic Growth

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  • Haile, D.
  • Sadrieh, A.
  • Verbon, H.A.A.

    (Tilburg University, Center for Economic Research)

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 Tilburg University, Center for Economic Research in its series Discussion Paper with number 2003-120.

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Date of creation: 2003
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Handle: RePEc:dgr:kubcen:2003120

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Keywords: economic growth; inequality; corruption; public goods;

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  2. Garcia-Penalosa, Cecilia & Aghion, Philippe & Caroli, Eve, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Economics Papers from University Paris Dauphine 123456789/10091, Paris Dauphine University.
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Cited by:
  1. Greiner, Ben & Ockenfels, Axel & Werner, Peter, 2012. "The dynamic interplay of inequality and trust—An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 355-365.
  2. Daniel Haile & Abdolkarim Sadrieh & Harrie A. A Verbon, 2006. "Cross-Racial Envy and Underinvestment in South Africa," CESifo Working Paper Series 1657, CESifo Group Munich.
  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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