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Voracity and Growth Reconsidered

  • Strulik, Holger

This article investigates economic performance when enforceable property rights are missing and subsistence needs matter. It shows that if per capita income is sufficiently high, a windfall gain in productivity triggers behavior that leads to higher growth (the normal reaction). The same shock can produce voracious behavior and lower growth when faced by poor economic agents, in particular when their productivity is low and their society is largely fractionalized. This leads to a re-assessment of the voracity effect. Economic and social performance depends no longer on character traits (the assumed curvature of the utility function) as assumed in the earlier literature. Instead, the initial degree of development, the state of technology, and the make up of society are decisive. An extension towards a two-sector economy shows that conditions for an active informal sector of low productivity are much less restrictive than originally thought.

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Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-401.

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Length: 25 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:han:dpaper:dp-401
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  1. Mino, Kazuo, 2006. "Voracity vs. scale effect in a growing economy without secure property rights," Economics Letters, Elsevier, vol. 93(2), pages 278-284, November.
  2. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  3. Ngo Van Long & Gerhard Sorger, 2004. "Insecure Property Rights and Growth: The Roles of Appropriation Costs, Wealth Effects, and Heterogeneity," CESifo Working Paper Series 1253, CESifo Group Munich.
  4. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  5. Ben-David,D., 1995. "Convergence Clubs and Subsistence Economies," Papers 43-95, Tel Aviv.
  6. Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
  7. Masao Ogaki & Jonathan D. Ostry & Carmen M. Reinhart, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 38-71, March.
  8. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
  9. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  10. Dalgaard, Carl-Johan & Strulik, Holger, 2007. "A Bioeconomic Foundation of the Malthusian Equilibrium: Body Size and Population Size in the Long-Run," Hannover Economic Papers (HEP) dp-373, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
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