Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/63013
Authors: 
Mehlum, Halvor
Moene, Karl
Torvik, Ragnar
Year of Publication: 
2000
Series/Report no.: 
Memorandum, Department of Economics, University of Oslo 2000,27
Abstract: 
In many developing and transition economies Mafia-like activities are rampant. Extortion and other forms of predation lower profitability in private businesses and distort investment incentives. Incorporated in a model of industrialization, bimodal club convergence may result. Economies may get stuck in a Predators’ Club characterized by a vicious circle of poverty and predation. Societies with a low flow of new entrepreneurs are especially vulnerable to predation and never get out of this club. Poor societies with high flow of new entrepreneurs, however, may grow out of the trap and join the rich Producers’ Club.
Subjects: 
Poverty traps
Club convergence
Organized crime
JEL: 
O1
O4
Document Type: 
Working Paper

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