Institutions and Development: The Interaction Between Trade Regime and Political System

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper argues that openness to goods trade in combination with an unequal distribution of political power has been a major determinant of the comparatively slow development of resource-or land-abundant regions like South America and the Caribbean in the nineteenth century. We develop a two-sector general equilibrium model with a tax-financed public sector, and show that in a feudal society (dominated by landed elites) productivity-enhancing public investments like the provision of schooling are typically lower in an open than in a closed economy. Moreover, we find that, under openness to trade, development is faster in a democratic system. We also endogenize the trade regime and demonstrate that, in political equilibrium, a land-abundant and landowner-dominated economy supports openness to trade. Finally, we discuss empirical evidence which strongly supports our basic hypotheses. Terms of use: Documents inJEL Code: F43, H50, N10, N16, O10.

Women, Livelihood and Oil and Gas Discovery in Ghana: An exploratory Study of Cape Three Points and Surrounding Communities

“…Galor, Moav and Vollrath (2009) in their model showed that landowners would eventually be in favor of mass education (because they own the bulk of the capital stock and there are capital-skill complementarities). Again, Falkinger and Grossmann (2005) proposed a theory in which the opposition of the landed elite to mass education is related to openness to trade, where an open trade regime is politically supported by the landed elite under a comparative advantage for primary goods production. However, this model does not explain the emergence of an entrepreneurial class with different interests than the traditional elite.…”

The Law of Primogeniture and the Transition from Landed Aristocracy to Industrial Democracy

“…Recent work on the role of agriculture in development includes Caselli and Coleman (2001), who focus on regional growth patterns in the U.S. during the past century, and Gollin, Parente, and Rogerson (2002), who stress the role of agricultural productivity in explaining cross-country income disparities. Different patterns of agrarian production organization are studied by Conning (2002) and Mookerjee and Ray (2002), while the adverse impact of landowners' interests for education reform is explored by Galor, Moav, and Vollrath (2002) and Falkinger and Grossmann (2004). Boix and Garicano (2001) stress the relevance of countryspecific wealth, of which land is the most typical and extreme example, in delaying the democratization process.…”

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