Declining Predation during Development: a Feedback Process
Empirical evidence suggests that poorer countries have larger portions of predation. We formulate a neoclassical growth model in which agents devote time either to produce or predate. When the elasticity of substitution between labor and capital is lower than one, the labor share rises with capital, reducing the incentive to predate and increasing the incentive to produce throughout the transition. Consequently, a feedback process between capital accumulation and predation arises which ampli¯es income di®erences generated by di®erences in productivity. Thus, this paper helps understand why di®erences among countries have remained stable and the key role that institutions play in development.
|Date of creation:||10 Oct 2012|
|Date of revision:|
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