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Rent-Seeking Government and Endogenous Takeoff in a Schumpeterian Economy

Chu, Angus C. (2020): Rent-Seeking Government and Endogenous Takeoff in a Schumpeterian Economy.

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Abstract

This study explores how the rent-seeking behavior of the government may impede economic development and delay industrialization. Introducing a rent-seeking government to the Schumpeterian growth model with endogenous takeoff, we find that a more self-interested government engages more in rent-seeking taxation, which delays the transition of the economy from pre-industrial stagnation to modern economic growth. Quantitatively, a completely self-interested government delays industrialization, relative to a benevolent government, by eight decades.

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