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Rent-Seeking Bureaucracies in a Schumpeterian Endogenous Growth Model : Effects on Human Capital Accumulation, Inequality and Growth

  • Luca, SPINESI

Some empirical works from the nineties have shown the existence of a negative relationship between inequality and growth. In this paper I show that the inefficiency of the Public Sector due to agency problems can be a new element that must e considered to explain the negative empirical relationship between inequality and growth. Considering a neo-Schumpeterian endogenous growth model, I envisage the relationship between rent-seeking bureaucracies and both the private market and political authority. I show that the inefficiency of the Public Sector can contribute to widening income inequality and reducing the per-capita output growth rate because of the skills waste in oversight of rent-seeking bureaucracies. Therefore bureaucratic quality can contribute to explaining the long-run negative relationship between inequality and growth. I show that these effects operates mostly in developed countries, where human capital accumulation and technological progress are fundamental engines for growth. Moreover, I show that more costly oversight reduces the consume of each existing product.

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Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2005027.

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Length: 31
Date of creation: 01 Feb 2005
Date of revision:
Handle: RePEc:ctl:louvec:2005027
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