Exploitation and Growth

John McDermott

Journal of Economic Growth, 1997, vol. 2, issue 3, 78 pages

Abstract: I develop a model of exploitation--coercive wealth transfer--and growth based on social importance. Exploitation reduces growth since the return to capital falls with exploitation costs. Initial relative wealth across groups--the measure of social importance--determines which group is the exploiter and how costly exploitation will be. The exploiter selects an exploitation path that maintains its dominant position and rarely maximizes current transfers. Productive minorities and fast-growing groups are most prone to exploitation. International sanctions, if strong, end exploitation; otherwise they increase exploitation and reduce growth. Segregation and apartheid are broadly consistent with the theory. Copyright 1997 by Kluwer Academic Publishers

Date: 1997
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