Rents and economic development: the perspective of Why Nations Fail
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We present the approach to comparative economic development of Why Nations Fail. Economic prosperity requires inclusive economic institutions—those which create broad based incentives and opportunities in society. Extractive economic institutions, which lack these properties, create poverty. Variation in economic institutions is created by differences in political institutions. Inclusive economic institutions are the result of political choices which arise under inclusive political institutions: a strong state and a broad distribution of power in society. When either of these conditions fails one has extractive political institutions that lead to extractive economic institutions. We relate our analysis to Tullock’s notion of ‘rent seeking’.
KeywordsRents Institutions Inclusive Extractive Politics
JEL ClassificationD72 D78 O00 O43
We thank two anonymous referees and the editor for their comments and suggestions and Alex Carr for her editorial assistance.
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