Voracity and Growth
University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Philip R. Lane
University of Dublin - Department of Economics; Centre for Economic Policy Research (CEPR)
NBER Working Paper No. w6498
We analyze an economy that lacks a strong legal-political institutional infrastructure an dis populated by multiple powerful groups. Powerful groups dynamically interact via fiscal process that effectively allows open access to the aggregate capital stock. In equilibrium, this leads to slow economic growth and a voracity effect,' by which a shock, such as a terms of trade windfall, perversely generates a more than proportionate increase in fiscal redistribution and reduces growth. We also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks.
Number of Pages in PDF File: 39working papers series
Date posted: June 11, 2000
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