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| Title: | DEMOCRACY, RENT SEEKING, PUBLIC SPENDING AND GROWTH |
| Authors: | Mohtadi, Hamid
Roe, Terry |
| Authors (Email): | Mohtadi, Hamid (mohtadi@umn.edu)
Roe, Terry (troe@umn.edu) |
| Issue Date: | 2001 |
| Series/Report no.: | Bulletin 01-2 |
| Abstract: | Does democratization imply faster growth, less corruption and less inefficiency? Past studies yield ambiguous results on the effects of democracy on economic performance and growth. We develop a simple two-sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization, producing a 'U' effect. This effect results from the pattern of rent seeking as it diverts from the provision of public goods. Rent-seekers act as monopolistic competitors. Initially, more democracy increases their number, raising aggregate rents. However, rents per rent-seeker fall with the number of rent seekers, aggregate rents fall in mature democracies. Thus, rents show an 'inverted-U' effects in relation to domocracy. We find fairly robust supportive evidence for the latter. |
| URI: | http://purl.umn.edu/12981 |
| Institution/Association: | University of Minnesota>Economic Development Center>Bulletins |
| Total Pages: | 22 |
| Language: | English |
| Collections: | Bulletins
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| edb01-02.pdf | 1006Kb | PDF | View/Open |
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