When Government Spending Serves the Elites: Consequences for Economic Growth in a Context of Market Imperfections

Ramon Lopez and Asif Islam

No 45875, Working Papers from University of Maryland, Department of Agricultural and Resource Economics

Abstract: Government spending should be regarded as a social and political phenomenon, not merely as a technical choice. We argue that there is an implicit contract between the organized elites and politicians which often leads to a pro-elite allocation of public resources. A natural and simple taxonomy of government spending follows from this view: spending in public goods broadly defined which mitigate market failures versus spending in non-social subsidies, mainly a vehicle to serve the elites. We theoretically and empirically show that pro-elite spending biases are costly in terms of economic growth. The empirical findings are exceptionally robust.

Keywords: International Development; Labor and Human Capital; Political Economy; Public Economics (search for similar items in EconPapers)
Pages: 58
Date: 2008
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:umdrwp:45875

DOI: 10.22004/ag.econ.45875

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