The author studies the persistence of inequality and inefficient governance in a physical capital accumulation model with perfect information, missing credit markets, and endogenous barriers to entry. When access to investment opportunities is regulated, rent-seeking entrepreneurs form coalitions of...

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Bibliographic Details

Main Author:	Đỗ-Quý-Toàn (Author)
Format:	Electronic eBook
Language:	English
Published:	Washington, D.C The World Bank 2004
Subjects:	Agents Bargaining Consensus Corruption Entry GDP Index Institutional Change Licensing Nature Production Roads and Highways Supply Transport
Online Access:	Volltext
Summary:	The author studies the persistence of inequality and inefficient governance in a physical capital accumulation model with perfect information, missing credit markets, and endogenous barriers to entry. When access to investment opportunities is regulated, rent-seeking entrepreneurs form coalitions of potentially varying size to bribe a regulator to restrict entry. Small coalitions run short of resources, while large coalitions suffer more severe free-rider problems. The distribution of wealth thus determines the equilibrium coalition structure of the economy and consequently the level of regulatory capture. A dynamic analysis supports the persistence of inefficiencies in the long run. Initial conditions determine whether the economy converges to a steady state characterized by efficient governance and low levels of inequality, or a path toward an institutional trap where regulatory capture and wealth inequality reinforce each other. This paper—a product of the Poverty Team, Development Research Group—is part of a larger effort in the group to understand the determinants of institutions
Physical Description:	1 Online-Ressource (35 Seiten)