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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

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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.

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