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Oligarchies And Development In A Global Economy: A Tale Of Two Elites

Author

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  • Anders Akerman
  • Alireza Naghavi
  • Anna Seim

Abstract

type="main" xml:id="ecin12284-abs-0001"> This paper studies how comparative advantage and the political elites' endowments shape long-run performance in economies with imperfect political institutions. The trade regime interacts with industrial policy and regulations on capital mobility in governing capital accumulation. In a capital-scarce economy, capitalist oligarchs striving for import substitution industrialization (ISI) initially shelter the economy from trade, while promoting industrial policies that promote total factor productivity growth in the manufacturing sector. This gradually shifts the comparative advantage toward manufacturing and renders the economy attractive to foreign investors. Allowing for trade and foreign capital inflows are thus complementary policies that spur growth in the capital oligarchy. By contrast, landed oligarchs in a capital-scarce economy favor openness to trade at an early stage of development, neglect industrial policies, and block foreign capital to maximize extractable rents. The policy mix causes the economy to stagnate. Consistent with the experiences of South Korea and Argentina in the postwar era, the model predicts that the success of ISI policies depends crucially on the conditions governing the incentives for capital accumulation. (JEL F10, F20, P40, P50, O10, O24)

Suggested Citation

  • Anders Akerman & Alireza Naghavi & Anna Seim, 2016. "Oligarchies And Development In A Global Economy: A Tale Of Two Elites," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 229-246, January.
  • Handle: RePEc:bla:ecinqu:v:54:y:2016:i:1:p:229-246
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    File URL: http://hdl.handle.net/10.1111/ecin.2016.54.issue-1
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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • P40 - Economic Systems - - Other Economic Systems - - - General
    • P50 - Economic Systems - - Comparative Economic Systems - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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