Self-serving dictators and economic growth

We study the effect of fair institutions on growth. In our model, individuals are endowed with unequal entitlements to the economy's output. They can free-ride or cooperate. Cooperation is individually costly, but increases aggregate output and growth. Experimentally, we observe significantly l...

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Bibliographic Details
Published in:Journal of economic behavior & organization 2008-09, Vol.67 (3), p.573-586
Main Authors: Haile, Daniel, Sadrieh, Abdolkarim, Verbon, Harrie A.A.
Format: Article
Language:English
Subjects:
Cooperation
Corruption
Dictators
Dictatorship
Dynamic public goods game
Economic growth
Economic models
Entitlement
Equal opportunities
Fair procedures
Free riding
Game theory
Inequalities
Inequality
Institutional design
Institutions
Political systems
Regression analysis
Studies
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Summary:We study the effect of fair institutions on growth. In our model, individuals are endowed with unequal entitlements to the economy's output. They can free-ride or cooperate. Cooperation is individually costly, but increases aggregate output and growth. Experimentally, we observe significantly less cooperation, when dictators chose high instead of low inequality. This effect is not observed when the degree of inequality is chosen randomly. Simple cross-country regressions provide basic macroeconomic support for interaction effects between the degree and the genesis of inequality. We conclude that economies granting equal opportunities are less likely to suffer retarded growth due to free-riding than economies with self-serving dictators.
ISSN:0167-2681
1879-1751
0167-2681
DOI:10.1016/j.jebo.2007.09.004