Rent-seeking, Government Size and Economic Growth

Waqar Wadho and Umair Ayaz

MPRA Paper from University Library of Munich, Germany

Abstract: We explore the relationship between government size and economic growth in an endogenous growth model with human capital and unproductive social capital. We show that with endogenous discounting, growth outcome is history dependent and is function of initial endowment of human capital. With low endowment, government intervention of any size is growth depressing. With high endowment, government intervention is not associated with any depressing effect. For intermediate levels, there are multiple equilibria. Furthermore, countries with identical endowment and government size can be in different equilibrium, and can have different growth rates within same equilibrium if they differ in institutional quality.

Keywords: Government size; Rent-seeking; Economic Growth; Human capital; Discounting (search for similar items in EconPapers)
JEL-codes: D72 D90 H11 J24 O41 O43 (search for similar items in EconPapers)
Date: 2015-02-22
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-hrm and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:71213

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