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Ethnic divisions and the effect of appropriative competition intensity on economic performance

Pierre Pecher ()

Economics of Governance, 2018, vol. 19, issue 2, 165-193

Abstract: Abstract This paper features a growth model with an appropriative contest and a common-pool investment game between politically organised rival ethnic factions. I determine how the long-run equilibrium coalition shapes incentives to invest, show the existence of a unique steady state, and investigate how the ease to capture rents affects economic performance. The use of numerical simulations concerning a global sample of countries demonstrates that contest intensity can sometimes be beneficial, despite wasteful grabbing behaviours, due to a mechanism related to the concentration of power. When rents become easier to capture, dominant groups have an incentive to expand their influence further. This adjustment can be beneficial as these groups contribute most to capital accumulation.

Keywords: Economic performance; Appropriative competition; Ethnic (search for similar items in EconPapers)
JEL-codes: E21 O43 P48 (search for similar items in EconPapers)
Date: 2018
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