DP6414 Institutional Traps and Economic Growth

Author(s): Mark Gradstein
Publication Date: August 2007
Keyword(s): growth, inequality, institutional quality, political bias
JEL(s): D31, D72, O10, O11
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6414

This paper's point of departure is that low-quality institutions, concentration of political power, and underdevelopment are persistent over time. Its analytical model views an equal distribution of political power as a commitment device to enhance institutional quality thereby promoting growth. The politically powerful coalition contemplates relinquishing of its power, weighing this advantageous consequence against the limit on own appropriative ability that it entails. The possibility of two developmental paths is exhibited: with concentration of political and economic power, low-quality institutions, and slow growth; and a more equal distribution of political and economic resources, high-quality institutions, and faster growth.