TY - JOUR
T1 - Democracy, rent seeking, public spending and growth
AU - Mohtadi, Hamid
AU - Roe, Terry L.
PY - 2003/3/1
Y1 - 2003/3/1
N2 - 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. Due to this crowding effect and the increased competition among rent seekers, aggregate rents fall in mature democracies. Thus, rents show an 'inverted-U' effect in relation to democracy. We find fairly robust supportive evidence for the latter.
AB - 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. Due to this crowding effect and the increased competition among rent seekers, aggregate rents fall in mature democracies. Thus, rents show an 'inverted-U' effect in relation to democracy. We find fairly robust supportive evidence for the latter.
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U2 - 10.1016/S0047-2727(01)00135-9
DO - 10.1016/S0047-2727(01)00135-9
M3 - Article
AN - SCOPUS:0038744277
SN - 0047-2727
VL - 87
SP - 445
EP - 466
JO - Journal of Public Economics
JF - Journal of Public Economics
IS - 3-4
ER -