Institutions and Development: The Interaction between Trade Regime and Political System
59 Pages Posted: 20 Oct 2004
There are 2 versions of this paper
Institutions and Development: The Interaction between Trade Regime and Political System
Date Written: September 2004
Abstract
This paper argues that openness to goods trade in combination with an unequal distribution of political power has been a major determinant of the comparatively slow development of resource- or land-abundant regions like South America and the Caribbean in the nineteenth century. We develop a two-sector general equilibrium model with a tax-financed public sector, and show that in a feudal society (dominated by landed elites) productivity-enhancing public investments like the provision of schooling are typically lower in an open than in a closed economy. Moreover, we find that, under openness to trade, development is faster in a democratic system. We also endogenize the trade regime and demonstrate that, in political equilibrium, a land-abundant and landowner-dominated economy supports openness to trade. Finally, we discuss empirical evidence which strongly supports our basic hypotheses.
Keywords: economic development, institutions, political system, public education, trade
JEL Classification: F43, H50, N10, N16, O10
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Population, Technology, and Growth: From the Malthusian Regime to the Demographic Transition
By Oded Galor and David N. Weil
-
By Oded Galor and David N. Weil
-
The Gender Gap, Fertility and Growth
By Oded Galor and David N. Weil
-
The Gender Gap, Fertility, and Growth
By Oded Galor and David N. Weil
-
By Gary D. Hansen and Edward C. Prescott
-
Natural Selection and the Origin of Economic Growth
By Oded Galor and Omer Moav
-
Natural Selection and the Origin of Economic Growth
By Oded Galor and Omer Moav
-
From Stagnation to Growth: Unified Growth Theory
By Oded Galor
-
From Stagnation to Growth: Unified Growth Theory
By Oded Galor
-
From Physical to Human Capital Accumulation: Inequality in the Process of Development
By Oded Galor and Omer Moav
