Voracity and Growth

Philip Lane and Aaron Tornell

Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research

Abstract: We analyze an economy that lacks a strong legal-political institutional infrastructure and is propulated by multiple powerful groups. Powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock. In equilibrium, this leads to slow economic growth and a "voracity effect," by which a shock, such as a terms of trade windfall, perversely generates a more than proportionate increase in fiscal redistribution and reduces growth. We also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks.

Date: 1997
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Related works:
Working Paper: Voracity and Growth (1998)
Working Paper: Voracity and Growth (1998)
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