DEMOCRACY, RENT SEEKING, PUBLIC SPENDING AND GROWTH

Hamid Mohtadi () and Terry Roe

No 12981, Bulletins from University of Minnesota, Economic Development Center

Abstract: Does democratization imply faster growth, less corruption and less inefficiency? Past studies yield ambiguous results on the effects of democracy on economic performance and growth. We develop a simple two-sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization, producing a 'U' effect. This effect results from the pattern of rent seeking as it diverts from the provision of public goods. Rent-seekers act as monopolistic competitors. Initially, more democracy increases their number, raising aggregate rents. However, rents per rent-seeker fall with the number of rent seekers, aggregate rents fall in mature democracies. Thus, rents show an 'inverted-U' effects in relation to democracy. We find fairly robust supportive evidence for the latter.

Keywords: Political; Economy (search for similar items in EconPapers)
Pages: 22
Date: 2001
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Democracy, rent seeking, public spending and growth (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umedbu:12981

DOI: 10.22004/ag.econ.12981

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