- Political Predation and Economic Development
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- Economic growth occurs as resources are reallocated from the traditional sector
to the modern sector, which is more productive. It is also more vulnerable
to political predation, however. Political risk can therefore hinder development.
We analyze a politico-economic game between citizens and governments, whose
type (benevolent or predatory) is unknown to the citizens. In equilibrium, opportunistic
governments mix between predation and restraint. As long as restraint
is observed, political expectations improve and the economy grows. Once there
is predation, the reputation of the current government is ruined and the economy
collapses. If citizens are unable to overthrow this government, the collapse
is durable. Otherwise, a new government is drawn and the economy can rebound.
Equilibrium dynamics are characterized as a Markov chain. Consistent with stylized
facts, equilibrium political and economic histories are random, unstable and
exhibit long—term divergence. Our theoretical model also generates new empirical
implications on the joint dynamics of income inequality, output and political
- Publication Type: WCFIA Working Paper
- Published Date: April 3, 2006.
- Field of Interest: International Economics
- Bates, Robert H., Jean Paul Azam, and Bruno Biais. "Political Predation and Economic Development." Working Paper 2008-0095, Weatherhead Center for International Affairs, Harvard University, April 3, 2006.