Inclusive Institutions and Long-Run Misallocation

Oded Galor, Kaivan Munshi and Nicolas Wilson

MPRA Paper from University Library of Munich, Germany

Abstract: This research advances the hypothesis that resource abundant economies characterized by a socially cohesive workforce and network externalities triggered the emergence of efficiency-enhancing inclusive institutions designed to restrict mobility and to enhance the attachment of community members to the local labor market. However, the persistence of these institutions, and the inter-generational transmission of their value, ultimately resulted in the misallocation of talents across occupations and a reduction in the long-run level of income per capita in the economy as a whole. Exploiting variation in resource intensity across the American Midwest during its initial development, the empirical analysis establishes that higher initial resource-intensity in 1860 is indeed associated with greater community participation over the subsequent 150 years, and reduced mobility and labor misallocation in the contemporary period.

Keywords: Inclusive institutions; Exclusive institutions; Growth; Networks; Labor misallocation; Persistence (search for similar items in EconPapers)
JEL-codes: O1 O10 O15 (search for similar items in EconPapers)
Date: 2013-10-01
New Economics Papers: this item is included in nep-lma
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Related works:
Working Paper: Inclusive Institutions and Long-Run Misallocation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:51643

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