To read the full-text of this research, you can request a copy directly from the author.
Abstract
In unequal societies, the judicial, political, and regulatory systems tend to be unable to restrain the ability of the very rich to disrespect rules and property rights. Institutions are weak and do not protect other members of society against expropriation by the rich, which reinforces inequality by means of concentrating investments, human capital, and access to credit.
GDP was 807 in the United States in 1800, but was 738 in Brazil by 1913. Relative factor endowments and institutions, broadly considered, are twin traditional explanations for the extremely diverse growth rates. In this paper we offer a complementary analysis of specific political and economic structures to help explain the success and persistence of monopoly restrictions in Brazil and the failure of internal mercantilism in the U.S. We conclude that Brazilian institutions provided a ripe and efficient environment for rent seeking. Such conditions did not exist in the U.S., a fact that helped produce the vast difference in growth in the 1800s. Copyright 2003 by Kluwer Academic Publishers
Motivated by the observed relevance of institutional quality, such as strong property rights, for economic performance, this research considers the emergence of property rights protection as a political outcome. It argues that the support for such protection is greater the more equal income distribution and the smaller political bias. When these conditions initially hold, the politically influential rich elite may prefer to relinquish its power through democratisation in order to commit future policy makers to the enforcement of property rights, thus ensuring larger investment and faster growth along the transition path. In a very unequal economy, however, such democratisation will not take place. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.