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Pampered Bureaucracy, Political Stability, and Trade Integration

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Author Info

  • Caleb Stroup

    ()
    (Department of Economics, Vanderbilt University)

  • Benjamin Zissimos

    ()
    (Department of Economics, Vanderbilt University)

Abstract

This paper shows how, under threat of revolution, a nation's elite are able to maintain political stability and hence ownership of their wealth by creating or expanding a `pampered bureaucracy.' The elite thus divert part of an otherwise entrepreneurial middle class from more productive manufacturing activities, reducing economic efficiency. If the country has a comparative advantage in primary products, trade integration is potentially destabilizing since it raises the payoff to the lower classes of mounting a revolution and challenging the elite for their wealth. In that case trade integration mandates expansion of the pampered bureaucracy. Therefore, trade integration may actually reduce economic efficiency. The econometric results provide supportive evidence for our model.

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File URL: http://www.accessecon.com/pubs/VUECON/vu11-w05.pdf
File Function: First version, April 2010, revised June 2011
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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 1105.

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Date of creation: Jun 2011
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Handle: RePEc:van:wpaper:1105

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Related research

Keywords: Efficiency; inefficient institutions; property rights; social conflict; trade integration.;

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  1. Daron Acemoglu & Davide Ticchi & Andrea Vindigni, 2007. "Emergence and Persistence of Inefficient States," Working Papers 0705, CREI Università degli Studi Roma Tre, revised 2007.
  2. Andrei A. Levchenko, 2004. "Institutional Quality and International Trade," IMF Working Papers 04/231, International Monetary Fund.
  3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  4. Robinson, James A. & Torvik, Ragnar & Verdier, Thierry, 2006. "Political foundations of the resource curse," Journal of Development Economics, Elsevier, vol. 79(2), pages 447-468, April.
  5. Acemoglu, Daron & Ticchi, Davide & Vindigni, Andrea, 2009. "Persistence of Civil Wars," Papers 09-06-2009, Princeton University, Research Program in Political Economy.
  6. Rubén Segura-Cayuela, 2006. "Inefficient policies, inefficient institutions and trade," Banco de Espa�a Working Papers 0633, Banco de Espa�a.
  7. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  8. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2005. "Globalization and Domestic Conflict," CESifo Working Paper Series 1510, CESifo Group Munich.
  9. Do, Quy-Toan & Levchenko, Andrei A., 2009. "Trade, inequality, and the political economy of institutions," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1489-1520, July.
  10. Nunn, Nathan, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," Scholarly Articles 4686801, Harvard University Department of Economics.
  11. Hijzen, Alexander & Görg, Holger & Manchin, Miriam, 2008. "Cross-border mergers and acquisitions and the role of trade costs," European Economic Review, Elsevier, vol. 52(5), pages 849-866, July.
  12. Costinot, Arnaud, 2007. "On the Origins of Comparative Advantage," University of California at San Diego, Economics Working Paper Series qt07g7g8h8, Department of Economics, UC San Diego.
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