Political Instability and Growth in Proprietary Economics
Developing country leaders typically resemble proprietors more than benevolent social planners, i.e., they are powerful individuals pursuing their own interests while they remain in power. We model growth in a 'proprietary economy" facing each period an endogenous probability of 'political catastrophe" that would hurt foreign investors and extinguish the proprietor's wealth extraction ability. We develop a model in which domestic capital exhibits a bifurcation point determining economic growth or shrink,9,ge. With low initial domestic capital the proprietor plunders the country's resources and the economy shrinks, even when shrinkage is not socially optimal. With high initial domestic capital the economy grows faster than is socially optimal.
|Date of creation:||01 Aug 1998|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 734 763-5020
Fax: 734 763-5850
Web page: http://www.wdi.umich.eduEmail:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:wdi:papers:1998-172. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron)
If references are entirely missing, you can add them using this form.