Rent-Seeking Government and Endogenous Takeoff in a Schumpeterian Economy

Chu, Angus C. and Furukawa, Yuichi and Wang, Xilin (2020): Rent-Seeking Government and Endogenous Takeoff in a Schumpeterian Economy. Forthcoming in: Journal of Macroeconomics

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 a Schumpeterian growth model that features endogenous takeoff, we find that a more self-interested government engages in more rent-seeking taxation, which delays the economy's transition from pre-industrial stagnation to modern economic growth. Quantitatively, a completely self-interested government could have delayed industrialization, relative to a benevolent government, by about two centuries in the UK.

• Item Type: MPRA Paper
• Language: English
• Keywords: rent-seeking government; endogenous takeoff; industrialization
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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