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Do Democracies Breed Rent-Seeking Behavior?

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  • César Calderón
  • Alberto Chong

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Abstract

Using objective institutional historical data we test the link between extent, duration, and transparency in democracies and rent-seeking behavior using time-series and panel data approaches. In this paper we focus on the case of Uruguay, an ethnically homogeneous country. We find three main results. First, democratic regimes are negatively linked with rent-seeking actions. Second, the longer the duration of democracy, the less rent-seeking in a society. Third, legislation enacted more transparently is negatively correlated with rent-seeking behavior. Our results are robust to the use of different econometric methods and basic robustness tests and are consistent with prevailing theory.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4415.

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Date of creation: Jun 2005
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Handle: RePEc:idb:wpaper:4415

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  1. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December.
  2. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
  3. Alberto Chong & Luisa Zanforlin, 2001. "Inward-Looking Policies, Institutions, Autocrats, and Economic Growth in Latin America: An Empirical Exploration," Research Department Publications 4255, Inter-American Development Bank, Research Department.
  4. A. Chong & C. Calderón, 2000. "Causality and Feedback Between Institutional Measures and Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 69-81, 03.
  5. Martín Rama, 1994. "Endogenous Trade Policy: A Time-Series Approach," Economics and Politics, Wiley Blackwell, vol. 6(3), pages 215-232, November.
  6. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  7. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  8. 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.
  9. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  10. Baldwin, Robert E, 1989. "The Political Economy of Trade Policy," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 119-35, Fall.
  11. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  12. Keefer, Philip, 2004. "Elections, special interests, and the fiscal costs of financial crisis," Policy Research Working Paper Series 3439, The World Bank.
  13. Alberto Chong & Luisa Zanforlin, 2004. "Inward-Looking Policies, Institutions, Autocrats, and Economic Growth in Latin America: An Empirical Exploration," Public Choice, Springer, vol. 121(3), pages 335-361, December.
  14. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, 03.
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Cited by:
  1. Marco Pani, 2011. "Hold your nose and vote: corruption and public decisions in a representative democracy," Public Choice, Springer, vol. 148(1), pages 163-196, July.
  2. Marco Pani, 2009. "Hold Your Nose and Vote: Why Do Some Democracies Tolerate Corruption?," IMF Working Papers 09/83, International Monetary Fund.
  3. César Calderón & Alberto Chong, 2006. "Búsqueda de rentas y democracia en América Latina: ¿Qué impulsa a qué?," Research Department Publications 4436, Inter-American Development Bank, Research Department.
  4. Hélène Ehrhart, 2011. "Assessing the relationship between democracy and domestic taxes in developing countries," Working Papers halshs-00553607, HAL.
  5. César Calderón & Alberto Chong, 2006. "Rent Seeking and Democracy in Latin America: What Drives What?," Research Department Publications 4435, Inter-American Development Bank, Research Department.

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