The Voracity Effect
Philip Lane and
American Economic Review, 1999, vol. 89, issue 1, 22-46
The authors analyze 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. The authors also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks.
JEL-codes: O17 F43 O41 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.89.1.22
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