On the political economy of a backward region
Purpose – The purpose of this paper is to develop a political economy model for a less developed region where a significantly large number of people belonging to the informal sector depend on political favours for their survival due to ill-defined property rights. The purpose is to show that in such a scenario, democracy and political competition might lead to economic stagnation. Design/methodology/approach – The arguments in the paper are represented in terms of a theoretical model. Findings – The central result is that the party with a better political organization will have the incentive to maximize the size of the informal sector, which will also maximize its probability of winning. In equilibrium this party choosing anti-development policies will have a higher probability to be in power. Thus universal franchise may lead to inefficiencies in such economies. These inefficiencies stem from ill-defined property rights in the informal sector. Originality/value – This paper is an original contribution to the class of political economy models of less developed countries.
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Volume (Year): 3 (2010)
Issue (Month): 2 ( October)
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References listed on IDEAS
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