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Rent-Seeking Bureaucracies in a Schumpeterian Endogenous Growth Model: Effects on Human Capital Accumulation, Inequality and Growth

Luca Spinesi ()

No 2005027, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: Some empirical works from the nineties have shown the existence of a negative relationship between inequality and growth. In this paper I show that the inefficiency of the Public Sector due to agency problems can be a new element that must e considered to explain the negative empirical relationship between inequality and growth. Considering a neo-Schumpeterian endogenous growth model, I envisage the relationship between rent-seeking bureaucracies and both the private market and political authority. I show that the inefficiency of the Public Sector can contribute to widening income inequality and reducing the per-capita output growth rate because of the skills waste in oversight of rent-seeking bureaucracies. Therefore bureaucratic quality can contribute to explaining the long-run negative relationship between inequality and growth. I show that these effects operates mostly in developed countries, where human capital accumulation and technological progress are fundamental engines for growth. Moreover, I show that more costly oversight reduces the consume of each existing product.

Keywords: technological progress; inequality and growth; asymmetric information; rent-seeking bureaucracies (search for similar items in EconPapers)
JEL-codes: D31 D82 H42 O30 (search for similar items in EconPapers)
Pages: 31
Date: 2005-02-01
New Economics Papers: this item is included in nep-dev, nep-pbe and nep-pol
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