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American Economic Review: Vol. 89 No. 1 (March 1999)
AER Volume. 89, Issue 1 | 
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The Voracity Effect
Article Citation
Tornell, Aaron, and
Philip R. Lane. 1999. "The Voracity Effect."
American Economic Review,
89(1): 22-46.
DOI: 10.1257/aer.89.1.22
DOI: 10.1257/aer.89.1.22
Abstract
The authors analyze an economy that lacks a strong legal-political institutional infrastructure and is populated by multiple powerful groups. Powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock. In equilibrium, this leads to slow economic growth and a 'voracity effect,' by which a shock, such as a terms of trade windfall, perversely generates a more-than-proportionate increase in fiscal redistribution and reduces growth. The authors also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks.
Article Full-Text Access
Full-text Article
Authors
Tornell, Aaron (Harvard U and NBER)
Lane, Philip R. (Trinity College, Dublin and CEPR)
Lane, Philip R. (Trinity College, Dublin and CEPR)
JEL Classifications
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
F43: Economic Growth of Open Economies
O41: One, Two, and Multisector Growth Models
F43: Economic Growth of Open Economies
O41: One, Two, and Multisector Growth Models
