OLIGARCHIES AND DEVELOPMENT IN A GLOBAL ECONOMY: A TALE OF TWO ELITES

Anders Akerman, Alireza Naghavi and Anna Seim

Economic Inquiry, 2016, vol. 54, issue 1, 229-246

Abstract: type="main" xml:id="ecin12284-abs-0001"> This paper studies how comparative advantage and the political elites' endowments shape long-run performance in economies with imperfect political institutions. The trade regime interacts with industrial policy and regulations on capital mobility in governing capital accumulation. In a capital-scarce economy, capitalist oligarchs striving for import substitution industrialization (ISI) initially shelter the economy from trade, while promoting industrial policies that promote total factor productivity growth in the manufacturing sector. This gradually shifts the comparative advantage toward manufacturing and renders the economy attractive to foreign investors. Allowing for trade and foreign capital inflows are thus complementary policies that spur growth in the capital oligarchy. By contrast, landed oligarchs in a capital-scarce economy favor openness to trade at an early stage of development, neglect industrial policies, and block foreign capital to maximize extractable rents. The policy mix causes the economy to stagnate. Consistent with the experiences of South Korea and Argentina in the postwar era, the model predicts that the success of ISI policies depends crucially on the conditions governing the incentives for capital accumulation. (JEL F10, F20, P40, P50, O10, O24)

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1111/ecin.2016.54.issue-1 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecinqu:v:54:y:2016:i:1:p:229-246

Ordering information: This journal article can be ordered from
https://ordering.onl ... s.aspx?ref=1465-7295

Access Statistics for this article

Economic Inquiry is currently edited by Tim Salmon

More articles in Economic Inquiry from Western Economic Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().