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Rent Preservation and the Persistence of Underdevelopment

  • Raghuram G. Rajan

When citizens in a poor constrained society are unequally endowed, they are likely to find it hard to agree on reforms, even though the status quo hurts them collectively. Each citizen group or constituency prefers reforms that expand its opportunities, but in an unequal society, this will typically hurt another constituency's rents. Competitive rent preservation ensures no comprehensive reform path may command broad support. The roots of underdevelopment may therefore lie in the natural tendency toward rent preservation in a divided society. (JEL D72, O10, O17)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mac.1.1.178
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Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 1 (2009)
Issue (Month): 1 (January)
Pages: 178-218

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Handle: RePEc:aea:aejmac:v:1:y:2009:i:1:p:178-218
Note: DOI: 10.1257/mac.1.1.178
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  1. Abhijit Banerjee & Lakshmi Iyer, 2010. "History Institutions and Economic Performance: The Legacy of Colonial Land Tenure Systems in India," Working Papers id:2811, eSocialSciences.
  2. Ricardo Hausmann & Dani Rodrik, 2002. "Economic Development as Self-Discovery," NBER Working Papers 8952, National Bureau of Economic Research, Inc.
  3. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
  4. Binswanger, Hans P. & Deininger, Klaus, 1997. "Explaining agricultural and agrarian policies in developing countries," Policy Research Working Paper Series 1765, The World Bank.
  5. Karla Hoff, 2003. "Paths of Institutional Development: A View from Economic History," World Bank Research Observer, World Bank Group, vol. 18(2), pages 205-226.
  6. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
  7. Avinash Dixit & John Londregan, 1998. "Ideology, Tactics, And Efficiency In Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 497-529, May.
  8. Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661926, June.
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