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  • Halvor Mehlum

    (University of Oslo)

  • Kalle Moene

    (University of Oslo)

  • Ragnar Torvik

    (University of Trondheim)

Unproductive enterprises that feed on productive businesses, are rampant in developing countries. A consequence of parasitic enterprises is that societies may be locked into a self enforcing configuration of beliefs and practices that result in persistent poverty. When entrepreneurs of both productive and parasitic enterprises are drawn from the same limited pool of entrepreneurs, the rise of parasitic profit opportunities may cause economic stagnation and underdevelopment that in turn enhance the profitability of parasitic enterprises relative to productive enterprises. Thus parasitic rent appropriation may induce stagnation, while stagnation may induce parasitic activities. Together the two links can lead developing economies into a poverty trap.

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Paper provided by EconWPA in its series Development and Comp Systems with number 0406003.

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Length: 20 pages
Date of creation: 05 Jun 2004
Date of revision:
Handle: RePEc:wpa:wuwpdc:0406003
Note: Type of Document - pdf; pages: 20
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  1. Halvor Mehlum & Karl Ove Moene & Ragnar Torvik, 2002. "Plunder & Protection Inc," Journal of Peace Research, Peace Research Institute Oslo, vol. 39(4), pages 447-459, July.
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  3. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2004. "Institutions and the Resource Curse," DEGIT Conference Papers c009_012, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implicationsfor Growth," University of Chicago - George G. Stigler Center for Study of Economy and State 65, Chicago - Center for Study of Economy and State.
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  9. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, vol. 83(2), pages 409-14, May.
  10. Daron Acemoglu, 1993. "Reward Structures and the Allocation of Talent," CEP Discussion Papers dp0143, Centre for Economic Performance, LSE.
  11. Mehlum, Halvor & Moene, Karl & Torvik, Ragnar, 2003. "Predator or prey?: Parasitic enterprises in economic development," European Economic Review, Elsevier, vol. 47(2), pages 275-294, April.
  12. Herschel I. Grossman, 1998. "Producers and Predators," Working Papers 98-6, Brown University, Department of Economics.
  13. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
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