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Rent Preservation and the Persistence of Underdevelopment

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  • Raghuram G. Rajan

Abstract

When citizens in a poor constrained society are very unequally endowed, they are likely to find it hard to agree on reforms, even though the status quo hurts them collectively. Each citizen group or constituency prefers reforms that expand its opportunities, but in an unequal society, this will typically hurt another constituency’s rents. Competitive rent preservation ensures no comprehensive reform path may command broad support. The roots of underdevelopment may therefore lie in the natural tendency towards rent preservation in a divided society.

Suggested Citation

  • Raghuram G. Rajan, 2006. "Rent Preservation and the Persistence of Underdevelopment," NBER Working Papers 12093, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:12093
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    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems
    • I2 - Health, Education, and Welfare - - Education
    • K0 - Law and Economics - - General

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