Polarization, Fractionalization, and Economic Growth Without Secure Property Rights (original) (raw)
Social Fractionalization, Endogenous Property Rights, and Economic Development
2004
We investigate how social composition affects competitive and cooperative behavior in a linear growth model without a priori secure property rights. If a society is homogenous or highly fractionalized it is in the self-interest of people to cooperate. The first best allocation is enforced through trigger strategies, property rights turn out to be secure, and growth is independent from social fractionalization. If a society is polarized, i.e. if it consists of a small number of equally sized groups, property rights can turn out as unenforceable. If so, groups follow an exploitive strategy that leads to low investment and growth. In this case the rate of growth is continuously decreasing in the degree of fractionalization and possibly negative.
Social Fractionalization, Endogenous Appropriation Norms, and Economic Development
Economica, 2008
We investigate how social composition affects competitive and cooperative behaviour in a linear growth model without secure property rights. If a society is homogeneous or highly fractionalized, it is in the selfinterest of people to cooperate. The first-best allocation is enforced through trigger strategies, and growth is independent from social structure. If a society is polarized, i.e. if it consists of a small number of groups, the first-best solution can turn out to be unenforceable and groups will follow an exploitative strategy. In this case, the rate of growth is monotonously decreasing in the degree of fractionalization.
Polarization, Politics, and Property Rights: Links between Inequality and Growth
Policy Research Working Papers, 1999
The policy implications of their argument are quite growth have focused on redistribution. However, distinct from those of arguments that inequality reduces empirical investigation has not substantiated either the growth by increasing pressures for redistribution. positive association of income inequality with If redistributive policies per se were to blame for the redistribution or the negative association of low growth resulting from inequality, governments that redistribution with economic growth. seek to mitigate income inequality must inevitably Keefer and Knack analyze the effects of inequality in confront a tradeoff between equity and growth. the broader context of social polarization. They argue If, on the other hand, the insecurity of property rights that social polarization, whether rooted in income slows growth in unequal or otherwise polarized societies, inequality or in ethnic tension, makes large changes in governments that commit over the long run to particular current policies (including those guaranteeing the redistributive policies incur less risk of slowing economic security of contract and property rights) more likely growth. Fiscal redistribution that reduces inequality may under a wide range of institutional arrangements. The actually increase growth by reducing the risks of political resulting uncertainties in the policy and contractual uncertainty. environment hinder growth. They find strong empirical support for both parts of this argument. This paper-a product of Regulation and Competition Policy, Development Research Group-is part of a larger effort in the group to understand the interplay of institutions and economic development. Copies of the paper are available free from the World Bank,
Why not Africa? -- Growth and Welfare Effects of Secure Property Rights
Public Choice, 2000
The paper presents the long-run equilibrium and development dynamics in the neoclassical growth model and a simple model of endogenous growth when property rights are absent. The results are compared to the outcome in a corresponding model economy with secure property rights. The main findings are that there exists a considerable gain in level and growth of consumption from establishing secure property rights, that economic performance without property rights worsens with increasing number of competing groups, and that the existence, or absence of property rights explains conditional convergence.
Competing Pressure Groups, Income Distribution and Growth
1 This paper proposes an endogenous growth model that establishes a negative relationship between the concentration of the non cumulative factor, namely land but also natural resources in general, and long run growth and that offers a theoretical background for redistribution policies such as land reform.
Recent cross-sectional growth studies have found that ethnolinguistic fractionalization is an important explanatory variable of long-run growth performance. In the present article, we follow the call of earlier studies to conduct a more detailed clinical analysis of the growth experience of a specific country. South Africa constitutes an interesting case in which to explore these questions. The results of this study provide important nuance to the existing body of evidence. We find that fractionalization is subject to strong change over time. In addition, we find strong evidence of webs of association between the various social, political and institutional dimensions. Thus various forms of social cleavage tend to go hand in hand, which presents the danger of spurious inference of association. Further, the direction of association in the preponderance of cases runs from economic to social, political and institutional variables, rather than the other way around. However, there remain significant impacts from some, but only some fractionalization indexes on economic growth. Which social cleavage, when, how and for what period of time will depend on the historical path of specific societies.
Optimal Growth Policy Under Privately Enforced Property Rights
A model of growth and imperfect property rights is used to examine the impact that government fiscal policy can have in tempering the inefficiencies associated with insecure property. Looking at optimal fiscal policy in this context gives insight into the problems involved with imperfect property rights and points to the limitations that governments must face in dealing with these problems. The main lesson from the analysis is that pro-growth policies may well be undesirable in societies that lack the full rule of law. This is because growth breeds conflict over economic distribution, exacerbating the problem of diversion, and consequently, there are circumstances in which the benefit from faster growth is outweighed by the increased welfare cost of the accompanying diversion. The model features a causal relationship from institutional improvement to investment and growth; but more importantly, it indicates why the desirability of the development of institutions-nation building-may rest, not on the release of constraints on growth, but rather on the creation of a situation in which growth per se becomes desirable.
Journal of Economic Growth - J ECON GROWTH, 1997
I develop a model of exploitation—coercive wealthtransfer—and growth based on social importance. Exploitationreduces growth since the return to capital falls with exploitationcosts. Initial relative wealth across groups—the measureof social importance—determines which group is the exploiterand how costly exploitation will be. The exploiter selects anexploitation path that maintains its dominant position and rarelymaximizes current transfers. Productive minorities and fast-growinggroups are most prone to exploitation. International sanctions,if strong, end exploitation; otherwise they increase exploitationand reduce growth. Segregation and apartheid are broadly consistentwith the theory.
Growth in the Shadow of Expropriation
2009
In this paper, we address two questions: (i) Why do developing countries with the highest growth rates export capital; and (ii) Why are some countries unable or unwilling to pursue the high growth/low debt strategies that has proven successful for many "miracle" economies. The model we study is a small open economy subject to political economy and contracting frictions. The political economy frictions involve polarization and political turnover, while the contracting friction is a lack of commitment regarding foreign debt and expropriation. We show that the political economy frictions induce growth dynamics in a limited-commitment environment that would otherwise move immediately to the steady state. In particular, greater polarization corresponds to a high tax rate on investment, which declines slowly over time, generating slow convergence to the steady state. Moreover, while political frictions shorten the horizon of the government, the government may still pursue a path of tax rates in which the first best investment is achieved in the long run, although the transition may be slow. The model rationalizes why openness has different implications for growth depending on the political environment, why institutions such as respect for property rights evolve over time, why governments in open countries that grow rapidly tend to accumulate net foreign assets rather than liabilities, and why foreign aid does not affect growth. * Preliminary. Comments welcome.