Discussion paper

DP2001 Voracity and Growth

We analyse an economy that lacks a strong legal-political institutional infrastructure and is populated by multiple powerful groups. Powerful groups dynamically interact via a 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 pro-cyclical response to shocks.

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Citation

Tornell, A and P Lane (1998), ‘DP2001 Voracity and Growth‘, CEPR Discussion Paper No. 2001. CEPR Press, Paris & London. https://cepr.org/publications/dp2001