Book contents
- Frontmatter
- Contents
- List of contributors
- Acknowledgments
- 1 Introduction: Conflict and appropriation as economic activities
- 2 Anarchy and its breakdown
- 3 Towards a model of territorial expansion and the limits of empire
- 4 Predation and production
- 5 Competitive trade with conflict
- 6 Increasing returns to politics in developing countries with endogenous protection in a fixed-factor model
- 7 Demosclerosis, or special interests “R” us: An information rationale for political gridlock
- 8 Deforestation, investment, and political stability
- 9 Violence and the assignment of property rights on two Brazilian frontiers
- Index
6 - Increasing returns to politics in developing countries with endogenous protection in a fixed-factor model
Published online by Cambridge University Press: 30 December 2009
- Frontmatter
- Contents
- List of contributors
- Acknowledgments
- 1 Introduction: Conflict and appropriation as economic activities
- 2 Anarchy and its breakdown
- 3 Towards a model of territorial expansion and the limits of empire
- 4 Predation and production
- 5 Competitive trade with conflict
- 6 Increasing returns to politics in developing countries with endogenous protection in a fixed-factor model
- 7 Demosclerosis, or special interests “R” us: An information rationale for political gridlock
- 8 Deforestation, investment, and political stability
- 9 Violence and the assignment of property rights on two Brazilian frontiers
- Index
Summary
Introduction
This paper examines the perennial political conflict between landowners and manufacturers in developing countries. Our theory predicts that only one of them wins in the long run. The Magee and Young (1983) theorem states that rates of return to any factor of production increase with a country's endowment of that factor in a Heckscher-Ohlin-Samuelson model of endogenous protection. Magee, Brock, and Young (1989)1 showed the conditions under which the result holds for both Leontief and Cobb-Douglas production in long-run models for advanced countries.
This paper extends Choi (1991) to explore whether increasing returns occur in a very different model, the Findlay-Wellisz fixed-factor model of endogenous protection for developing countries. The interesting economic issue is whether a politically induced price effect from more capital in an economy more than offsets the diminishing returns from more capital. The issue is analytically difficult, so simulations are required.
Consider a developing country with manufacturing imports and agricultural exports with Leontief production and logit probability of election functions. If the increasing returns result holds in developing countries, it should work as follows. If the capital endowment of the country increases, the capital lobby will channel more capital to the procapital party. This increases both the probability of election of the procapital party and the vote-maximizing tariff level that it supports on manufactured imports. The sum of these two effects raises the expected domestic price of the importable good. This politically induced price effect more than offsets the diminishing returns caused by more capital in the economy, yielding increasing returns to country factor endowments.
- Type
- Chapter
- Information
- The Political Economy of Conflict and Appropriation , pp. 97 - 118Publisher: Cambridge University PressPrint publication year: 1996