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http://hdl.handle.net/10419/20506
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| Title: | | Institutions and Development : The Interaction between Trade Regime and Political System  |
| Authors: | | Falkinger, Josef Grossmann, Volker |
| Issue Date: | | 2004 |
| Series/Report no.: | | IZA Discussion paper series 1242 |
| Abstract: | | 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. |
| Subjects: | | economic development institutions political system public education trade |
| JEL: | | H50 F43 N10 O10 N16 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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