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Pampered Bureaucracy and Trade Liberalization

Author

Listed:
  • 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.

Suggested Citation

  • Caleb Stroup & Ben Zissimos, 2010. "Pampered Bureaucracy and Trade Liberalization," Vanderbilt University Department of Economics Working Papers 1004, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:1004
    as

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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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    References listed on IDEAS

    as
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    4. Do, Quy-Toan & Levchenko, Andrei A., 2009. "Trade, inequality, and the political economy of institutions," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1489-1520, July.
    5. 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.
    6. 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.
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    10. 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.
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    More about this item

    Keywords

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

    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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