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American Economic Journal: Macroeconomics: Vol. 1 No. 1 (January 2009)

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Rent Preservation and the Persistence of Underdevelopment

Article Citation

Rajan, Raghuram G. 2009. "Rent Preservation and the Persistence of Underdevelopment." American Economic Journal: Macroeconomics, 1(1): 178-218.

DOI: 10.1257/mac.1.1.178

Abstract

When citizens in a poor constrained society are unequally endowed, they are likely to find it hard to agree on reforms, even though the status quo hurts them collectively. Each citizen group or constituency prefers reforms that expand its opportunities, but in an unequal society, this will typically hurt another constituency's rents. Competitive rent preservation ensures no comprehensive reform path may command broad support. The roots of underdevelopment may therefore lie in the natural tendency toward rent preservation in a divided society. (JEL D72, O10, O17)

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Authors

Rajan, Raghuram G. (U Chicago)

JEL Classifications

D72: Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
O10: Economic Development: General
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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American Economic Journal: Macroeconomics


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