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Do Governments Suppress Growth? Institutions, Rent‐Seeking, And Innovation Blocking In A Model Of Schumpeterian Growth

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  • AZAM CHAUDHRY
  • PHILLIP GARNER

Abstract

This paper argues that some governments adopt growth‐reducing policies due to the rational self‐interest of the political elites. The model takes a rent‐seeking government that can block innovation and incorporates it into a Schumpeterian growth model. The quality of a country's institutions is reflected in the cost of innovation blocking. An increase in the level of innovation‐blocking activity will reduce the rate of innovation and therefore reduce growth. The government also faces the possibility of losing power whenever an innovation occurs. We examine the conditions under which a government will choose to block innovation and suppress growth.

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  • Azam Chaudhry & Phillip Garner, 2007. "Do Governments Suppress Growth? Institutions, Rent‐Seeking, And Innovation Blocking In A Model Of Schumpeterian Growth," Economics and Politics, Wiley Blackwell, vol. 19(1), pages 35-52, March.
    • Handle: RePEc:bla:ecopol:v:19:y:2007:i:1:p:35-52
    DOI: 10.1111/j.1468-0343.2007.00301.x
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    References listed on IDEAS

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    1. Acemoglu, Daron & Robinson, James A., 2006. "Economic Backwardness in Political Perspective," American Political Science Review, Cambridge University Press, vol. 100(1), pages 115-131, February.
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    Cited by:

    1. Marcus Dejardin, 2011. "Entrepreneurship and Rent-Seeking Behavior," Working Papers 1112, University of Namur, Department of Economics.
    2. Iyigun, Murat & Rubin, Jared & Seror, Avner, 2021. "A theory of cultural revivals," European Economic Review, Elsevier, vol. 135(C).
    3. Chaudhry, Azam & Bukhari, Syed Kalim Hyder, 2013. "A structural VAR analysis of the impact of macroeconomic shocks on Pakistan's textile exports," Economic Modelling, Elsevier, vol. 32(C), pages 302-315.
    4. ., 2010. "The Korean Political System and its Effects on the Economy," Chapters, in: The Korean Economy in Transition, chapter 3, Edward Elgar Publishing.
    5. Leiva, Benjamin, 2020. "Natural resource rent allocation, government quality, and concession design: The case of copper in Chile," Resources Policy, Elsevier, vol. 68(C).
    6. Chu, Angus C. & Furukawa, Yuichi & Wang, Xilin, 2022. "Rent-seeking government and endogenous takeoff in a Schumpeterian economy," Journal of Macroeconomics, Elsevier, vol. 72(C).
    7. Damián Vergara, 2022. "Do policies and institutions matter for pre-tax income inequality? Cross-country evidence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(1), pages 30-52, February.
    8. Chaudhry, Azam & Garner, Phillip, 2013. "The political economy of income comparisons and economic growth," Economic Modelling, Elsevier, vol. 31(C), pages 214-222.
    9. Azam Chaudhry & Phillip Garner, 2006. "Political Competition Between Countries and Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 666-682, November.
    10. Roxas, Banjo & Chadee, Doren, 2013. "Effects of formal institutions on the performance of the tourism sector in the Philippines: The mediating role of entrepreneurial orientation," Tourism Management, Elsevier, vol. 37(C), pages 1-12.
    11. Peter Linquiti & Nathan Cogswell, 2016. "The Carbon Ask: effects of climate policy on the value of fossil fuel resources and the implications for technological innovation," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 6(4), pages 662-676, December.
    12. Azam Chaudhry, 2011. "Tariffs, Trade and Economic Growth in a Institutionals Quality," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(2), pages 31-54, Jul-Dec.

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