Institutional Trap

Institutional Trap

The author studies the persistence of inequality and inefficient governance in a physical capital accumulation model with perfect information, missing credit markets, and endogenous barriers to entry. When access to investment opportunities is regu...

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Bibliographic Details
Main Author: Do, Quy-Toan
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, D.C. 2013
Subjects:
INSTITUTIONS
INEQUALITY
ENDOGENOUS
COALITIONS
PERSISTENCE
Online Access:http://documents.worldbank.org/curated/en/2004/04/3391904/institutional-trap
http://hdl.handle.net/10986/14771
id okr-10986-14771
recordtype oai_dc
spelling okr-10986-147712021-04-23T14:03:20Z Institutional Trap Do, Quy-Toan INSTITUTIONS INEQUALITY ENDOGENOUS COALITIONS PERSISTENCE The author studies the persistence of inequality and inefficient governance in a physical capital accumulation model with perfect information, missing credit markets, and endogenous barriers to entry. When access to investment opportunities is regulated, rent-seeking entrepreneurs form coalitions of potentially varying size to bribe a regulator to restrict entry. Small coalitions run short of resources, while large coalitions suffer more severe free-rider problems. The distribution of wealth thus determines the equilibrium coalition structure of the economy and consequently the level of regulatory capture. A dynamic analysis supports the persistence of inefficiencies in the long run. Initial conditions determine whether the economy converges to a steady state characterized by efficient governance and low levels of inequality, or a path toward an institutional trap where regulatory capture and wealth inequality reinforce each other. 2013-08-02T13:04:17Z 2013-08-02T13:04:17Z 2004-04 http://documents.worldbank.org/curated/en/2004/04/3391904/institutional-trap http://hdl.handle.net/10986/14771 English en_US Policy Research Working Paper;No.3291 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic INSTITUTIONS
INEQUALITY
ENDOGENOUS
COALITIONS
PERSISTENCE
spellingShingle INSTITUTIONS
INEQUALITY
ENDOGENOUS
COALITIONS
PERSISTENCE
Do, Quy-Toan
Institutional Trap
relation Policy Research Working Paper;No.3291
description The author studies the persistence of inequality and inefficient governance in a physical capital accumulation model with perfect information, missing credit markets, and endogenous barriers to entry. When access to investment opportunities is regulated, rent-seeking entrepreneurs form coalitions of potentially varying size to bribe a regulator to restrict entry. Small coalitions run short of resources, while large coalitions suffer more severe free-rider problems. The distribution of wealth thus determines the equilibrium coalition structure of the economy and consequently the level of regulatory capture. A dynamic analysis supports the persistence of inefficiencies in the long run. Initial conditions determine whether the economy converges to a steady state characterized by efficient governance and low levels of inequality, or a path toward an institutional trap where regulatory capture and wealth inequality reinforce each other.
format Publications & Research :: Policy Research Working Paper
author Do, Quy-Toan
author_facet Do, Quy-Toan
author_sort Do, Quy-Toan
title Institutional Trap
title_short Institutional Trap
title_full Institutional Trap
title_fullStr Institutional Trap
title_full_unstemmed Institutional Trap
title_sort institutional trap
publisher World Bank, Washington, D.C.
publishDate 2013
url http://documents.worldbank.org/curated/en/2004/04/3391904/institutional-trap
http://hdl.handle.net/10986/14771
_version_ 1764430053732515840

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