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Social Fractionalization, Endogenous Appropriation Norms, and Economic Development

Ines Lindner () and Holger Strulik ()

Economica, 2008, vol. 75, issue 298, 244-258

Abstract: We investigate how social composition affects competitive and cooperative behaviour in a linear growth model without secure property rights. If a society is homogeneous or highly fractionalized, it is in the self-interest of people to cooperate. The first-best allocation is enforced through trigger strategies, and growth is independent from social structure. If a society is polarized, i.e. if it consists of a small number of groups, the first-best solution can turn out to be unenforceable and groups will follow an exploitative strategy. In this case, the rate of growth is monotonously decreasing in the degree of fractionalization. Copyright (c) The London School of Economics and Political Science 2007.

Date: 2008
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