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Contribution Details
Type | Working Paper |
Scope | Discipline-based scholarship |
Title | Institutions and development: The interaction between trade regime and political system |
Organization Unit | |
Authors |
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Language |
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Institution | CESifo Group Munich |
Series Name | CESifo Working Paper |
Number | 1279 |
Number of Pages | 59 |
Date | 2004 |
Abstract Text | This paper argues that openness to goods trade in combination with an unequal distribution of political power has been a major determinant of the comparatively slow development of resource- or land-abundant regions like South America and the Caribbean in the nineteenth century. We develop a two-sector general equilibrium model with a tax-financed public sector, and show that in a feudal society (dominated by landed elites) productivity-enhancing public investments like the provision of schooling are typically lower in an open than in a closed economy. Moreover, we find that, under openness to trade, development is faster in a democratic system. We also endogenize the trade regime and demonstrate that, in political equilibrium, a land-abundant and landowner-dominated economy supports openness to trade. Finally, we discuss empirical evidence which strongly supports our basic hypotheses. |
Free access at | Official URL |
Official URL | http://www.cesifo-group.de/de/ifoHome/publications/working-papers/CESifoWP/CESifoWPdetails?wp_id=14559293 |
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