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Exploitation and Growth

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  • McDermott, John

Abstract

I develop a model of exploitation--coercive wealth transfer--and growth based on social importance. Exploitation reduces growth since the return to capital falls with exploitation costs. Initial relative wealth across groups--the measure of social importance--determines which group is the exploiter and how costly exploitation will be. The exploiter selects an exploitation path that maintains its dominant position and rarely maximizes current transfers. Productive minorities and fast-growing groups are most prone to exploitation. International sanctions, if strong, end exploitation; otherwise they increase exploitation and reduce growth. Segregation and apartheid are broadly consistent with the theory. Copyright 1997 by Kluwer Academic Publishers

Suggested Citation

  • McDermott, John, 1997. "Exploitation and Growth," Journal of Economic Growth, Springer, vol. 2(3), pages 251-278, September.
  • Handle: RePEc:kap:jecgro:v:2:y:1997:i:3:p:251-78
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    References listed on IDEAS

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    1. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
    2. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
    3. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    4. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
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    Cited by:

    1. Francesco Caselli & Wilbur John Coleman II, 2013. "On The Theory Of Ethnic Conflict," Journal of the European Economic Association, European Economic Association, vol. 11, pages 161-192, January.
    2. Holger Strulik, 2008. "Social composition, social conflict and economic development," Economic Journal, Royal Economic Society, vol. 118(530), pages 1145-1170, July.

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