IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/18441.html
   My bibliography  Save this paper

Can't We All Be More Like Scandinavians? Asymmetric Growth and Institutions in an Interdependent World

Author

Listed:
  • Daron Acemoglu
  • James A. Robinson
  • Thierry Verdier

Abstract

Because of their more limited inequality and more comprehensive social welfare systems, many perceive average welfare to be higher in Scandinavian societies than in the United States. Why then does the United States not adopt Scandinavian-style institutions? More generally, in an interdependent world, would we expect all countries to adopt the same institutions? To provide theoretical answers to this question, we develop a simple model of economic growth in a world in which all countries benefit and potentially contribute to advances in the world technology frontier. A greater gap of incomes between successful and unsuccessful entrepreneurs (thus greater inequality) increases entrepreneurial effort and hence a country's contribution to the world technology frontier. We show that, under plausible assumptions, the world equilibrium is asymmetric: some countries will opt for a type of "cutthroat capitalism" that generates greater inequality and more innovation and will become the technology leaders, while others will free- ride on the cutthroat incentives of the leaders and choose a more "cuddly" form of capitalism. Paradoxically, those with cuddly reward structures, though poorer, may have higher welfare than cutthroat capitalists; but in the world equilibrium, it is not a best response for the cutthroat capitalists to switch to a more cuddly form of capitalism. We also show that domestic constraints from social democratic parties or unions may be beneficial for a country because they prevent cutthroat capitalism domestically, instead inducing other countries to play this role.

Suggested Citation

  • Daron Acemoglu & James A. Robinson & Thierry Verdier, 2012. "Can't We All Be More Like Scandinavians? Asymmetric Growth and Institutions in an Interdependent World," NBER Working Papers 18441, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18441
    Note: IFM ITI POL
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w18441.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Roland Benabou & Efe A. Ok, 2001. "Social Mobility and the Demand for Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 447-487.
    2. Timothy Smeeding, 2002. "Globalization, Inequality and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study," LIS Working papers 320, LIS Cross-National Data Center in Luxembourg.
    3. Roland Bénabou & Jean Tirole, 2006. "Belief in a Just World and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 699-746.
    4. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
    5. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, March.
    6. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 79-119.
    7. Larry G. Epstein & Stanley E. Zin, 2013. "Substitution, risk aversion and the temporal behavior of consumption and asset returns: A theoretical framework," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 12, pages 207-239, World Scientific Publishing Co. Pte. Ltd..
    8. Daron Acemoglu & Jaume Ventura, 2002. "The World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 659-694.
    9. André Sapir, 2006. "Globalization and the Reform of European Social Models," Journal of Common Market Studies, Wiley Blackwell, vol. 44(2), pages 369-390, June.
    10. Krueger, Dirk & Kumar, Krishna B., 2004. "US-Europe differences in technology-driven growth: quantifying the role of education," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 161-190, January.
    11. Cameron, David R., 1978. "The Expansion of the Public Economy: A Comparative Analysis," American Political Science Review, Cambridge University Press, vol. 72(4), pages 1243-1261, December.
    12. Bottazzi, Laura & Peri, Giovanni, 2003. "Innovation and spillovers in regions: Evidence from European patent data," European Economic Review, Elsevier, vol. 47(4), pages 687-710, August.
    13. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
    14. William R. Kerr, 2008. "Ethnic Scientific Communities and International Technology Diffusion," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 518-537, August.
    15. Taylor, Mark Zachary, 2004. "Empirical Evidence Against Varieties of Capitalism's Theory of Technological Innovation," International Organization, Cambridge University Press, vol. 58(3), pages 601-631, July.
    16. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-494, June.
    17. Gian Maria Milesi-Ferretti & Roberto Perotti & Massimo Rostagno, 2002. "Electoral Systems and Public Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 609-657.
    18. Alberto Alesina & Edward L. Glaeser & Bruce Sacerdote, 2005. "Work and Leisure in the U.S. and Europe: Why So Different?," NBER Working Papers 11278, National Bureau of Economic Research, Inc.
    19. Alesina, Alberto & La Ferrara, Eliana, 2005. "Preferences for redistribution in the land of opportunities," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 897-931, June.
    20. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 551-584.
    21. Krugman, Paul & Venables, Anthony J., 1996. "Integration, specialization, and adjustment," European Economic Review, Elsevier, vol. 40(3-5), pages 959-967, April.
    22. Kiminori Matsuyama, 2002. "Explaining Diversity: Symmetry-Breaking in Complementarity Games," American Economic Review, American Economic Association, vol. 92(2), pages 241-246, May.
    23. Rachel Griffith & Stephen Redding & John Van Reenen, 2003. "R&D and Absorptive Capacity: Theory and Empirical Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(1), pages 99-118, March.
    24. Kiminori Matsuyama, 2008. "Aggregate Implications of Credit Market Imperfections," NBER Chapters, in: NBER Macroeconomics Annual 2007, Volume 22, pages 1-60, National Bureau of Economic Research, Inc.
    25. Akkermans, Dirk & Castaldi, Carolina & Los, Bart, 2009. "Do 'liberal market economies' really innovate more radically than 'coordinated market economies'?: Hall and Soskice reconsidered," Research Policy, Elsevier, vol. 38(1), pages 181-191, February.
    26. Timothy M. Smeeding, 2002. "Globalization, Inequality, and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study (LIS)," Center for Policy Research Working Papers 48, Center for Policy Research, Maxwell School, Syracuse University.
    27. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Di Tella, Rafael & Dubra, Juan, 2008. "Crime and punishment in the "American Dream"," Journal of Public Economics, Elsevier, vol. 92(7), pages 1564-1584, July.
    2. Pfarr Christian & Ulrich Volker, 2011. "Discrete-Choice-Experimente zur Ermittlung der Präferenzen für Umverteilung," Review of Economics, De Gruyter, vol. 62(3), pages 232-262, December.
    3. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't the US Have a European-Style Welfare System?," NBER Working Papers 8524, National Bureau of Economic Research, Inc.
    4. Bruno Amable, 2009. "The Differentiation of Social Demands in Europe. The Social Basis of the European Models of Capitalism," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 91(3), pages 391-426, May.
    5. Kuhn, Andreas, 2011. "In the eye of the beholder: Subjective inequality measures and individuals' assessment of market justice," European Journal of Political Economy, Elsevier, vol. 27(4), pages 625-641.
    6. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't The US Have a European-Style Welfare State?," Harvard Institute of Economic Research Working Papers 1933, Harvard - Institute of Economic Research.
    7. Cruces, Guillermo & Perez-Truglia, Ricardo & Tetaz, Martin, 2013. "Biased perceptions of income distribution and preferences for redistribution: Evidence from a survey experiment," Journal of Public Economics, Elsevier, vol. 98(C), pages 100-112.
    8. Laméris, Maite D. & Garretsen, Harry & Jong-A-Pin, Richard, 2020. "Political ideology and the intragenerational prospect of upward mobility," European Journal of Political Economy, Elsevier, vol. 62(C).
    9. repec:hal:spmain:info:hdl:2441/13pk3v50kg9i9q98f7erie10rb is not listed on IDEAS
    10. Joan Esteban & Laurence Kranich, 2003. "The Social Contracts with Endogenous Sentiments," Working Papers 71, Barcelona School of Economics.
    11. Kerr, William R., 2014. "Income inequality and social preferences for redistribution and compensation differentials," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 62-78.
    12. Di Tella, Rafael & Galiani, Sebastian & Schargrodsky, Ernesto, 2012. "Reality versus propaganda in the formation of beliefs about privatization," Journal of Public Economics, Elsevier, vol. 96(5), pages 553-567.
    13. Alberto Alesina & George-Marios Angeletos, 2005. "Fairness and Redistribution," American Economic Review, American Economic Association, vol. 95(4), pages 960-980, September.
    14. Kuhn, Andreas, 2009. "In the Eye of the Beholder: Subjective Inequality Measures and the Demand for Redistribution," IZA Discussion Papers 4360, Institute of Labor Economics (IZA).
    15. Roland Iwan Luttens & Marie-Anne Valfort, 2012. "Voting for Redistribution under Desert-Sensitive Altruism," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 881-907, September.
    16. Gualtieri, Giovanni & Nicolini, Marcella & Sabatini, Fabio, 2019. "Repeated shocks and preferences for redistribution," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 53-71.
    17. Elvire Guillaud, 2008. "Preferences for redistribution: a European comparative analysis," PSE Working Papers halshs-00586260, HAL.
    18. Andreas Georgiadis & Alan Manning, 2012. "Spend it like Beckham? Inequality and redistribution in the UK, 1983–2004," Public Choice, Springer, vol. 151(3), pages 537-563, June.
    19. Gilles Le Garrec, 2014. "Fairness, socialization and the cultural deman for redistribution," Sciences Po publications 2014-20, Sciences Po.
    20. Gilles Le Garrec, 2011. "Redistribution and the cultural transmission of the taste for fairness," Documents de Travail de l'OFCE 2011-24, Observatoire Francais des Conjonctures Economiques (OFCE).
    21. Roth, Christopher & Wohlfart, Johannes, 2018. "Experienced inequality and preferences for redistribution," Journal of Public Economics, Elsevier, vol. 167(C), pages 251-262.

    More about this item

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:18441. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.