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Institutions and growth in limited access societies

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  • Barseghyan, Levon
  • Guerdjikova, Ani

Abstract

We build a dynamic political economy model with a two-class society, workers and the elite, in which the elite formation, the innovation rate and fiscal policy are endogenous. The model generates a mapping between institutions and patterns of growth consistent with empirical evidence. Ex ante, when facing constraints in choosing institutions, the elite may delegate policy control to some of its members, even though such delegation exacerbates the conflict within the elite and causes policy failures. Committing to such institutional arrangements prevents more harmful outcomes, such as rapid entry and subsequent deterioration of the elite[modifier letter apostrophe]s economic and political power.

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  • Barseghyan, Levon & Guerdjikova, Ani, 2011. "Institutions and growth in limited access societies," Journal of Economic Theory, Elsevier, vol. 146(2), pages 528-568, March.
    • Handle: RePEc:eee:jetheo:v:146:y:2011:i:2:p:528-568
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