Private Incentives versus Class Interests: Implications for Growth
AbstractWe consider an economy, in which the elite controls the means of production. The private incentives of each elite member contradict the interests of the elite as a whole. While each member of the elite would benefit from engaging into new productive activities, the byproduct of such activities is an increase in competition and hence decrease in elite's profits. We provide a model which allows us to parameterize the degree of consolidation of the elite q. We find that in a steady-state, the rate at which new technologies are implemented is constant and is decreasing in q. We next allow the elite to invest into a productivity enhancing public good. We show that the investments in public good increase in q. We conclude that there exists an optimal level of consolidation of the elite which maximizes economic growth. We illustrate our model using examples from the period of the Industrial Revolution in England and Russia.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 795.
Date of creation: 2007
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- Roger Lagunoff & William Jack, 2004.
2004 Meeting Papers
466, Society for Economic Dynamics.
- William Jack & Roger Lagunoff, 2003. "Dynamic Enfranchisement," Public Economics 0306002, EconWPA, revised 01 Jul 2003.
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- William Jack & Roger Lagunoff, 2003. "Dynamic Enfrachisement," Working Papers gueconwpa~03-03-03, Georgetown University, Department of Economics.
- Roger Lagunoff & William Jack, 2004. "Dynamic Enfranchisement," Econometric Society 2004 North American Summer Meetings 24, Econometric Society.
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- Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
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