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Pampered Bureaucracy and Trade Liberalization

Author Info

Listed author(s):
  • Caleb Stroup

    ()

    (Department of Economics, Vanderbilt University)

  • Ben Zissimos

    ()

    (Department of Economics, Vanderbilt University)

Abstract

This paper shows how a nation's elite maintain ownership of their wealth by creating a `pampered bureaucracy.' The elite thus divert part of an otherwise entrepreneurial middle class from more productive manufacturing activities, reducing economic efficiency. Trade liberalization is potentially destabilizing since it lowers the opportunity cost to the lower classes of challenging the elite for their wealth. If trade liberalization does take place, it may mandate expansion of the pampered bureaucracy. Therefore, trade liberalization may actually reduce economic efficiency. The econometric results support our model and contribute to the literature on trade liberalization and the size of government.

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File URL: http://www.accessecon.com/pubs/VUECON/vu10-w04.pdf
File Function: First version, April 2010
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Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 1004.

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Date of creation: Apr 2010
Handle: RePEc:van:wpaper:1004
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Keywords: Bureaucracy; efficiency; inefficient institutions; social conflict; trade liberalization;

Find related papers by JEL classification:

  • D30 - Microeconomics - - Distribution - - - General
  • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
  • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
  • F10 - International Economics - - Trade - - - General
  • F15 - International Economics - - Trade - - - Economic Integration

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  1. Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, vol. 63(2), pages 209-235, July.
  2. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  3. Dani Rodrik, 2008. "Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Banks Economic Growth in the 1990s: Learning from a Decade of Reform," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(2), pages 135-156, June.
  4. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
  5. Daron Acemoglu & Simon Johnson & James A. Robinson, 2002. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1231-1294.
  6. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  7. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
  8. Garfinkel, Michelle R. & Skaperdas, Stergios & Syropoulos, Constantinos, 2008. "Globalization and domestic conflict," Journal of International Economics, Elsevier, vol. 76(2), pages 296-308, December.
  9. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
  10. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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