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On the political economy of a backward region

On the political economy of a backward region Purpose – The purpose of this paper is to develop a political economy model for a less developed region where a significantly large number of people belonging to the informal sector depend on political favours for their survival due to ill‐defined property rights. The purpose is to show that in such a scenario, democracy and political competition might lead to economic stagnation. Design/methodology/approach – The arguments in the paper are represented in terms of a theoretical model. Findings – The central result is that the party with a better political organization will have the incentive to maximize the size of the informal sector, which will also maximize its probability of winning. In equilibrium this party choosing anti‐development policies will have a higher probability to be in power. Thus universal franchise may lead to inefficiencies in such economies. These inefficiencies stem from ill‐defined property rights in the informal sector. Originality/value – This paper is an original contribution to the class of political economy models of less developed countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Indian Growth and Development Review Emerald Publishing

On the political economy of a backward region

Indian Growth and Development Review , Volume 3 (2): 16 – Sep 28, 2010

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References (39)

Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8254
DOI
10.1108/17538251011084455
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to develop a political economy model for a less developed region where a significantly large number of people belonging to the informal sector depend on political favours for their survival due to ill‐defined property rights. The purpose is to show that in such a scenario, democracy and political competition might lead to economic stagnation. Design/methodology/approach – The arguments in the paper are represented in terms of a theoretical model. Findings – The central result is that the party with a better political organization will have the incentive to maximize the size of the informal sector, which will also maximize its probability of winning. In equilibrium this party choosing anti‐development policies will have a higher probability to be in power. Thus universal franchise may lead to inefficiencies in such economies. These inefficiencies stem from ill‐defined property rights in the informal sector. Originality/value – This paper is an original contribution to the class of political economy models of less developed countries.

Journal

Indian Growth and Development ReviewEmerald Publishing

Published: Sep 28, 2010

Keywords: Political economy; Economic growth; Developing countries; Property rights; India

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