## _wp0543

## Source details

**Canonical URL:** [_wp0543](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2005/_wp0543.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2005/_wp0543.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2005/_wp0543.pdf.json)

---

### Introduction — motivation and contribution
- Common features identified: lack of development, stagnant growth, insecure property rights, income inequality, and widespread rent seeking.
- Core mechanism: when the government cannot protect property rights, wealthy agents have stronger incentives to engage in rent seeking because they have more to lose from expropriation; fixed costs and borrowing constraints generate increasing returns to rent seeking and determine the size of the rent-seeking sector and associated efficiency losses.
- Interpretations of the fixed cost θ:
  - Purchase of weapons (protection and offense).
  - Costs of purchasing political power and influence (transaction costs of lobbying, large fixed costs of political organization).
- Contribution: a simple general-equilibrium model with imperfect capital markets and a non-convex rent-seeking technology showing how initial wealth distribution drives entry into rent seeking and how the rent-seeking sector size affects economy-wide distortions.
- Extension: heterogeneous productive abilities introduce a trade-off where wealthier agents may choose production despite being able to afford rent seeking; this typically lowers social costs of rent seeking, but main implications generalize.

### II. Model — environment, technology, and primitives
- Population and endowments:
  - Continuum of two-period lived agents on [0,1].
  - Each agent endowed with w > 0 units of the consumption good when young.
  - Initial distribution represented by cumulative distribution function Γ.
- Preferences and consumption:
  - Risk neutral agents with lifetime expected utility E[c1 + c2].
  - Second-period consumption uncertain because it depends on the degree of rent seeking.
- Production and appropriation:
  - Production technology f(i) with f(0) = 0 and f'(0) = ∞.
  - Rent extraction parameter 0 < γ < 1 denotes proportion of market production that can be extracted.
- Rent-seeking sector:
  - Entry requires fixed cost θ; agents cannot borrow to finance θ (must have w ≥ θ).
  - Rent seekers can expropriate from λ ≥ 1 producers and hoard with gross return x > 1.
  - Increasing returns to rent seeking arise from fixed θ and borrowing constraints.

### Key mechanisms and implications (homogeneous abilities)
- Wealth-dependent incentives:
  - Wealthier agents have stronger incentives to become rent seekers because they have more to lose from expropriation and can afford θ.
- Probabilities and matching:
  - n = mass of rent seekers; producers mass = (1 - n).
  - πP = min{nλ/(1 - n), 1}.
  - πR = min{(1 - n)/(λ n), 1}.
  - Threshold n satisfies 1/(1 + λ) = n ≤ 1/2 for λ ≥ 1.
- Producer optimization:
  - Budget constraints: c1P = w - i; c2P = γ f(i) with probability πP, f(i) with probability (1 - πP).
  - First-order condition: (1 - πP γ) f'(i) = 1.
  - Investment i*P(πP, γ) is decreasing in πP and γ.
  - Indirect utility: V_P = w + (1 - πP) f(i*).
- Rent seeker optimization:
  - Expected rent from a successful match: R = λ γ f(i*).
  - Savings choice s = w - θ since x > 1.
  - Indirect utility: V_R = -θ + πR λ γ f(i*) + x (w - θ).
- Occupational cutoff:
  - Net benefit Ω(w) = V_R - V_P is strictly increasing in w (since x > 1).
  - There exists cutoff w* with agents w ≥ w* choosing rent seeking; n = 1 - Γ(w*).

### Equilibrium characterization and multiplicity
- Equilibrium (w*, n*) solves:
  - V_R(n*, w*) = V_P(n*, w*) (indifference at cutoff).
  - Producer FOC: (1 - πP(n*) γ) f'(i*) = 1.
  - πP and πR follow piecewise forms depending on n relative to n.
- Zero-net-utility curve behavior:
  - For n < n: πR = 1 and πP = nλ/(1 - n); zero-net-utility curve is downward sloping in (n, w).
  - For n > n: πP = 1 and πR = (1 - n)/(λ n); zero-net-utility curve is upward sloping in (n, w).
- Existence and multiplicity:
  - If C_w < w* (textual definition), unique equilibrium with n* > 0.
  - If C_w > w*, multiple equilibria possible: n = 0 (no rent seeking), positive n > n, and an unstable interior equilibrium.
- Comparative statics:
  - Lower θ and/or higher λ γ make positive rent-seeking equilibrium more likely.
  - Higher γ raises attractiveness of rent seeking, reduces production (raises n*, lowers w*).
  - If λ sufficiently large, n and n* can be less than 1/2 (small elite expropriating many producers).

### Propositions and aggregate welfare
- Proposition 1: If θ is low relative to expected returns, unique equilibrium with positive measures in both occupations.
- Proposition 2: Greater initial wealth increases attractiveness of rent seeking; "the rich become rent seekers."
- Aggregate effects:
  - Hoarding return x < marginal product f'(i) at equilibrium with high γ implies hoarding is lower-productivity than production.
  - Larger rent-seeking sector reduces aggregate output; net output (aggregate output net of rent-seeking costs) is even lower.

### Extension — heterogeneity in ability
- Setup:
  - Individuals differ in wealth w (distribution Γ on [w_, w̄]) and ability a (distribution G on [a_, ā]), drawn independently; production returns = a f(i).
- Producer FOC: (1 - πP γ) (a f)'(i) = 1 → i* = i*(a, πP).
- Indirect utilities:
  - Producer: V_P(a, w, πP) = w + (1 - πP) a f(i*(a, πP)).
  - Rent seeker: V_R as before, with R aggregated over choices.
- Occupational cutoff with ability:
  - Ω(a, w) increases in w and decreases in a.
  - For each w ≥ θ there exists h(w) such that a ≤ h(w) ⇒ agent chooses rent seeking.
  - Measure of rent seekers: n = ∫_{w*}^{w̄} ∫_{a_}^{h(w)} dG(a) dΓ(w).
- Implications:
  - High-ability wealthy agents may prefer production; low-ability wealthy agents more likely to be rent seekers.
  - Social cost of rent seeking is lower than in homogeneous-ability model: fewer become rent seekers and those who do are less productive as producers.

### Dynamics and policy implications
- Dynastic persistence:
  - Intergenerational transfers correlated with parental wealth can create persistent rent-seeking dynasties.
- Taxation and redistribution:
  - Taxing the rich raises their effective cost of rent seeking and can shift them into production.
  - Redistribution to the poor may be counterproductive if post-tax endowments exceed θ, increasing their incentive to rent seek.
  - Preferred policy: use tax revenues to subsidize production directly to raise returns to investment for all.
  - In economies with multiple equilibria, sufficiently progressive temporary redistribution may permanently eliminate rent seeking by shifting coordination expectations.
- Law enforcement and institutional reform:
  - Reducing γ (improving enforcement/property rights) lowers attractiveness of rent seeking.
  - Financing enforcement (e.g., lump-sum taxes on producers) may create tradeoffs; enforcement need not eliminate rent seeking if funding distorts incentives.
- Other policy levers:
  - Reducing entry cost θ and easing credit constraints shift agents toward production.
  - Policies that lower the extractable proportion γ increase returns to production relative to rent seeking.

### Conclusion — core insights
- Nonconvex entry into rent seeking (θ), inability to borrow, and protection technology (x > 1) create increasing returns that make wealthier agents more likely to become rent seekers.
- Greater inequality and weak property rights (higher γ) increase social polarization and reduce aggregate output via misallocation toward hoarding and appropriation.
- Heterogeneous ability attenuates but does not overturn main results: rent seeking still arises but imposes smaller social costs when wealth and ability are uncorrelated.
- Natural extensions: dynamic settings and endogenous enforcement (public or private defense investment) to study persistence and evolution of rent seeking and property rights.

*Content derived exactly from source PDF: _wp0543 - References..............................................................................................................*

### References..............................................................................................................

### _wp0543 - References..............................................................................................................

### Introduction
- Lack of development, stagnant growth, insecure property rights, income inequality, and widespread rent seeking are common features of many economies; rent seeking diverts productive resources toward appropriative activities and reduces growth by lowering incentives and opportunities for production and investment.
- Empirical cross-country findings cited: corruption and rent seeking are associated with lower capital accumulation, productivity, and growth (Mauro, 1995; Keefer and Knack, 1997; and Hall and Jones, 1999).
- Extensive rent seeking and insecure property rights are associated with substantial income and wealth inequality; Olson (1971) argued corruption and rent seeking are more likely in unequal societies.
- The paper addresses why entry into rent-seeking activities persists and why the relatively wealthy often choose rent-seeking occupations (government bureaucracy, army, police) rather than productive entrepreneurship.
- Core mechanism: when the government cannot protect property rights, wealthy agents have stronger incentives to engage in rent seeking because they have more to lose from expropriation; fixed costs and borrowing constraints generate increasing returns to rent seeking and determine the size of the rent-seeking sector and associated efficiency losses.
- Interpretations of the fixed cost for rent seeking:
  - Purchase of weapons (protection and offense): enabling protection from expropriation and extraction of rents.
  - Costs of purchasing political power and influence: transaction costs of lobbying, large fixed costs of political organization.
- Historical and contemporary evidence supporting increasing returns to rent seeking and wealth–rent-seeking association: Roman tax farming, seventeenth-century France, Mandarin China, medieval Europe, colonial Latin America, India (Wade, 1984), civil-service purchase (Alfiler, 1986), Eastern European privatization experiences (Hoff and Stiglitz, 2002; Sonin, 2003).
- Contribution of the paper: a simple general-equilibrium model with imperfect capital markets and a non-convex rent-seeking technology showing how initial wealth distribution drives entry into rent seeking and how the rent-seeking sector size affects economy-wide distortions.
- Extension: heterogeneous productive abilities introduce a trade-off where wealthier agents may choose production despite being able to afford rent seeking; this typically lowers social costs of rent seeking, but main implications generalize.
- Relation to literature:
  - Investment indivisibilities and credit market imperfections (Galor and Zeira, 1993; Banerjee and Newman, 1993; Aghion and Bolton, 1994).
  - Political participation with fixed costs and increasing returns (Verdier, 1996; Rodriguez, 1999).
  - Rent-seeking and development literature (Baumol, 1990; Murphy, Shleifer, and Vishny, 1993; Acemoglu, 1995; Mehlum, Moene, and Torvik, 2003; Baland and Francois, 2000).
  - Conflict literature linking inequality, predation, and defense (Grossman, 1991; 1994; Skaperdas, 1992; Grossman and Kim, 1997).

### II. MODEL — A. Environment and Technology
- Population and endowments:
  - Economy comprised of a continuum of two-period lived agents distributed over the interval [0,1].
  - Each agent is endowed with w > 0 units of the consumption good when young.
  - Initial distribution of goods endowment represented by the cumulative distribution function 
    :[,]Rww
    ++ Γ→.
- Preferences and consumption:
  - Agents are risk neutral, identical in preferences and abilities, differing only in initial income.
  - Lifetime expected utility stated as: 1212 (, )( )Uc cc   Ec=+  where E is the expectations operator, and 1 c and 2 c  denote consumption in each period; second-period consumption is uncertain because it depends on the degree of rent seeking in the economy.
- Production technology and appropriation:
  - Each producer has a concave production technology f(i) yielding f(i) units of the consumption good in period two from investment i in period one, with f(0) = 0 and 
    '(0)f=∞.
  - Producers face appropriation of some share of market production by rent seekers; there is no law enforcement and no government taxation.
  - Rent extraction parameter: let 0 < γ < 1 denote the exogenously given proportion of market production that can be extracted from each producer; γ interpreted as the profit loss due to taxes, bribes, outright expropriation, or more generally, the cost of doing business in a rent-seeking society.
  - Note: γ may be endogenously determined by development level, effectiveness of law enforcement, or institutional efficiency in reality.
- Rent-seeking sector description:
  - Rent seekers pay a fixed cost for entry; payment enables appropriation of some portion of surplus from production and allows rent seekers to save a desired portion of initial incomes (hoarding) to protect wealth from expropriation.
  - Borrowing constraints and fixed entry costs create increasing returns to rent seeking; size of the rent-seeking sector and efficiency losses depend on initial wealth distribution.
  - Predation and deterrence are treated as complementary: fixed costs enable both protection of wealth and predation on others.

### Key model mechanisms and implications
- Wealth-dependent incentives:
  - With insecure property rights, wealthier agents have stronger incentives to become rent seekers because they have more to lose from expropriation and can afford fixed entry costs.
- Non-convex rent-seeking technology and increasing returns:
  - Fixed entry costs and borrowing constraints produce increasing returns to rent seeking, implying multiple potential equilibria depending on wealth distribution and parameters.
- Occupational choice and heterogeneity:
  - In the homogeneous-ability baseline, agents choose between rent seeking and production based on initial income.
  - When abilities differ (extension), wealthy agents may choose production if comparative advantage outweighs rent-seeking returns; rent seeking may then impose lower social costs, but qualitative results persist.
- Policy-relevant insights:
  - Secure property rights and effective law enforcement reduce incentives for wealth-based entry into rent seeking.
  - Reducing fixed costs of productive entry and easing credit constraints can shift agents toward production rather than appropriation.
  - Institutional reforms that lower γ (the extractable proportion) will increase returns to production relative to rent seeking.

*Italic source attribution: Content derived exactly from source PDF: _wp0543 - References..............................................................................................................*

### 2003. Let π

### _wp0543 - 2003. Let π

### Model setup: agents, technologies, and probabilities
- Producers choose investment i in period 1; production returns f(i) in period 2.
- Rent seekers expropriate a share γ of production; γ appears in payoff expressions unchanged.
- Parameters and assumptions:
  - λ ≥ 1 (each rent seeker can expropriate from λ producers).
  - x > 1 (gross return on hoarding/protection).
  - Entry into rent seeking requires upfront fixed cost θ.
  - Agents cannot borrow to finance θ; an agent must have w ≥ θ to enter rent seeking.
- Definition of probabilities:
  - n is the mass (fraction) of rent seekers; producers mass is (1 - n).
  - Probability a producer is approached by a rent seeker, πP, defined as πP = min,1{nλ/(1-n)} (equation (1) and subsequent piecewise forms).
  - Probability a given rent seeker is first to approach a producer, πR = min,1{(1-n)/(λn)} (equation (2) and subsequent piecewise forms).
  - Threshold n satisfies total rent-seeking cases = fraction of producers; 1/(1+λ) = n ≤ 1/2 for λ ≥ 1.

### Producer optimization and welfare
- Producer budget constraints (periods 1 and 2):
  - c1P = w - i
  - c2P = with probability πP: γ f(i); with probability (1 - πP): f(i)
- Producer maximizes expected utility; first-order condition:
  - (1 - πP γ) f'(i) = 1  (equation (5))
- Implications:
  - For positive probability of theft, f'(i) > 1/(1 - πP γ) > 1.
  - Investment i*P(πP, γ) is decreasing in πP and γ.
- Indirect utility from producing:
  - V_P = w + (1 - πP) f(i*) (equation (6)).

### Rent seeker optimization and welfare
- Rent seeker returns:
  - Expected rent from a successful match: R = λ γ f(i*) (equation (7)), where i* is independent of wealth.
- Rent seeker budget constraints:
  - c1R = w - s - θ
  - c2R = with probability πR: s x + R; with probability (1 - πR): s x
- With x > 1, rent seekers save entire first-period income net of θ:
  - s = w - θ  (equation (8))
- Indirect utility from rent seeking:
  - V_R = -θ + πR R + x (w - θ)  (equation (9))
  - In equilibrium, V_R = -θ + πR λ γ f(i*) + x (w - θ).

### Occupational choice and cutoff
- Net benefit of rent seeking for an agent with endowment w:
  - Ω(w) = V_R - V_P = x w - x θ + πR λ γ f(i*) - (1 - πP) f(i*) - w  (equation (10) rearranged in text)
- Properties:
  - Ω(w) is strictly increasing in w (since x > 1).
  - There exists cutoff w* such that agents with w ≥ w* choose rent seeking and those with w < w* choose production.
- Population allocation:
  - n = 1 - Γ(w*), where Γ(·) is cumulative distribution of w (equation (11)).

### Equilibrium characterization (n*, w*)
- Equilibrium defined by (w*, n*) such that:
  - Agents with w* are indifferent: V_R(n*, w*) = V_P(n*, w*).
  - Producer first-order condition holds: (1 - πP(n*) γ) f'(i*) = 1.
  - Probability functions πP and πR follow equations (3) and (4) (piecewise dependence on n relative to n).
- Zero-net-utility curve behavior:
  - For n < n:
    - πR = 1; πP = nλ/(1 - n)
    - Ω(n, w) = x w - x θ + [1 - (1 - n) / (1 + λ n?) expression simplifies as in (13) — text gives form showing Ω increasing in w and n for n < n.
    - Zero-net-utility curve is downward sloping in (n, w).
  - For n > n:
    - πP = 1; πR = (1 - n)/(λ n)
    - Ω(n, w) is increasing in w but decreasing in n (equation (14)).
    - Zero-net-utility curve is upward sloping in (n, w).

### Equilibrium multiplicity and parameter effects
- Existence results:
  - If C_w < w* (defined textually), there is a unique equilibrium with n* > 0 (figure 2 scenario).
  - If C_w > w*, multiple equilibria possible: no rent seeking (n = 0), positive n > n, and an unstable interior equilibrium (figure 3 scenario).
- Comparative statics:
  - Lower θ and/or higher λ γ make positive rent-seeking equilibrium more likely.
  - If λ is sufficiently large, n and n* can be less than 1/2 (small elite expropriating many producers).
  - Higher γ (weaker property rights) increases attractiveness of rent seeking and reduces production (shifts net-utility curve down, raising n*, lowering w*).

### Propositions and welfare implications
- Proposition 1:
  - If cost θ is low relative to expected returns, there is a unique equilibrium with a positive measure of agents in both rent seeking and production.
- Proposition 2:
  - In equilibrium, greater initial wealth increases the attractiveness of rent seeking relative to producing; "the rich become rent seekers."
- Aggregate effects:
  - Since x < f'(i) at equilibrium with high γ, hoarding yields lower marginal product than production; larger rent-seeking sector reduces aggregate output.
  - Net output (aggregate output net of rent-seeking costs) is even lower.

### Key assumptions and robustness
- Crucial assumptions:
  - Indivisibility in rent seeking (fixed cost θ creates increasing returns and nonconvexity).
  - Rent seekers have access to a protection technology (hoarding return x > 1).
  - No borrowing against future income (credit market imperfections).
  - Law enforcement probability of catching rent seekers implicitly set to zero (γ not endogenized unless enforcement financed).
- Robustness notes:
  - Main results robust to alternative rent-seeking formulations where expropriation per rent seeker declines with n.
  - Allowing law enforcement to reduce γ could lower attractiveness of rent seeking, but financing enforcement via lump-sum taxes on producers can generate tradeoffs; rent seeking not necessarily eliminated.
  - With functioning credit markets but high collateral requirements, wealthy agents still disproportionately able to enter rent seeking.

### Extension: heterogeneity in ability
- Setup:
  - Individuals differ in wealth w and productive ability a, drawn independently with distributions Γ(w) on [w_, w̄] and G(a) on [a_, ā].
  - Production returns become a f(i).
- Producer first-order condition:
  - (1 - πP γ) (a f)'(i) = 1 → i* = i*(a, πP) (equation (15)).
- Indirect utilities:
  - Producer: V_P(a, w, πP) = w + (1 - πP) a f(i*(a, πP))  (equation (16)).
  - Rent seeker: same V_R as before, but R depends on aggregate choices (equation (17)).
- Occupational choice with ability:
  - Ω(a, w) increases in w and decreases in a (equation (18)).
  - For each w ≥ θ there exists h(w) with a ≤ h(w) ⇒ agent chooses rent seeking.
  - Measure of rent seekers: n = ∫_{w*}^{w̄} ∫_{a_ =}^{h(w)} dG(a) dΓ(w) (equation (20)).
  - Expected rent R expressed as double integral over wealth and ability (equation (21)).
- Implications:
  - High-ability wealthy agents may prefer production; low-ability wealthy agents more likely to be rent seekers.
  - Compared to homogeneous-ability model, social cost of rent seeking is lower: fewer become rent seekers and those who do are less productive as producers.

### Dynamics and policy implications
- Dynastic persistence:
  - With intergenerational transfers correlated with parental wealth, occupational choices can persist across generations (rent-seeking dynasties).
  - With weak intergenerational correlation in ability, dynastic mobility across occupations can occur.
- Policy implications concerning redistribution and enforcement:
  - Taxing the rich raises their effective cost of rent seeking and can shift them into production.
  - Redistributing tax revenues to the poor may be counterproductive if post-tax endowments exceed θ, increasing their incentive to rent seek.
  - Better policy: use tax revenues to subsidize production directly to raise returns to investment for all.
  - In economies with multiple equilibria, a sufficiently progressive temporary redistribution may permanently eliminate rent seeking by moving coordination expectations (coordination problem noted in footnote).
- Law enforcement:
  - Effective enforcement (reducing γ) lowers attractiveness of rent seeking; financing enforcement creates tradeoffs.

### Conclusion: core insights
- In absence of enforceable property rights and with nonconvex entry into rent seeking (θ), wealthy agents can afford entry and protection (x), making them more likely to become rent seekers.
- Greater inequality and weak property rights (higher γ) increase social polarization and reduce aggregate output via misallocation toward lower-productivity hoarding.
- Heterogeneous ability attenuates but does not overturn main results: rent seeking still arises but imposes smaller social costs when wealth and ability are uncorrelated.
- Extensions to dynamic settings and endogenous enforcement (public or private defense investment) are natural next steps to study persistence and evolution of rent seeking and property rights.

*Source: IMF working paper _wp0543 (2003) — extracted content and equations as presented in the chapter.*

### REFERENCES

### _wp0543 - REFERENCES

### Economics of rent-seeking, corruption, and predation
- Krueger, Anne O., 1974, “The Political Economy of the Rent-Seeking Society,” American Economic Review, Vol. 64, No. 3, pp. 291–303.
- Murphy, Kevin M., Andrei Shleifer, and Robert W. Vishny, 1993, “Why Is Rent-Seeking So Costly to Growth?” American Economic Review, Papers and Proceedings, Vol. 83, No. 2, pp. 409–14.
- Baland, Jean-Marie, and Patrick Francois, 2000, “Rent-Seeking and Resource Booms,” Journal of Development Economics, Vol. 61, No. 2, pp. 527–42.
- Mehlum, Halvor, Karl Moene, and Ragnar Torvik, 2003, “Predator or Prey? Parasitic Enterprises in Economic Development,” European Economic Review, Vol. 47, No. 2, pp. 275–94.
- Grossman, Herschel I., 1991, “A General Equilibrium Model of Insurrections,” American Economic Review, Vol. 81, No. 4, pp. 912–21.
- Grossman, Herschel I., 1994, “Production, Appropriation, and Land Reform,” American Economic Review, Vol. 84, No. 3, pp. 705–12.
- Grossman, Herschel I., and Minseong Kim, 1997, “Predation, Efficiency, and Inequality,” NBER Working Paper No. 6301 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Dabla-Norris, Era, and Paul Wade, 2002, “Production, Rent Seeking, and Wealth Distribution,” in Governance, Corruption, and Economic Performance, ed. by George T. Abed and Sanjeev Gupta (Washington: International Monetary Fund).
- Alfiler, Ma. Concepcion P., 1986, “The Process of Bureaucratic Corruption in Asia: Emerging Patterns,” in Bureaucratic Corruption in Asia: Causes, Consequences and Controls, ed. by Ledivina V. Cariño (Quezon City: JMC Press).

### Inequality, distribution, and development
- Bénabou, Ronald, 1996, “Inequality and Growth,” NBER Working Paper No. 5658 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Galor, Oded, and Joseph Zeira, 1993, “Income Distribution and Macroeconomics,” Review of Economic Studies, Vol. 60, No. 1, pp. 35–52.
- Mookherjee, Dilip, and Debraj Ray, 2003, “Persistent Inequality,” Review of Economic Studies, Vol. 70, No. 2, pp. 369–93.
- Rodríguez, C. Francisco, 1999, “Inequality, Redistribution and Rent-Seeking,” Department of Economics Working Paper (College Park, Maryland: University of Maryland).
- Easterly, William, 2002, “Inequality Does Cause Underdevelopment: New Evidence,” CGD Working Paper No. 1 (Washington: Center for Global Development).
- World Bank, 2003, Inequality in Latin America and the Caribbean: Breaking with History (Washington: World Bank).

### Institutions, property rights, and political economy
- Acemoglu, Daron, 1995, “Reward Structures and the Allocation of Talent,” European Economic Review, Vol. 39, No. 1, pp. 17–33.
- Acemoglu, Daron, and Thierry Verdier, 1998, “Property Rights, Corruption and the Allocation of Talent: A General Equilibrium Approach,” Economic Journal, Vol. 108 (September), pp. 1381–1403.
- Hoff, Karla Ruth, and Joseph E. Stiglitz, 2004, “After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies,” American Economic Review, Vol. 94, No. 3, pp. 753–63.
- Keefer, Philip, and Stephen Knack, 1997, “Why Don’t Poor Countries Catch Up? A Cross-National Test of an Institutional Explanation,” Economic Inquiry, Vol. 35 (July), pp. 590–602.
- Keefer, Philip, and Stephen Knack, 2002, “Polarization, Politics, and Property Rights,” Public Choice, Vol. 111 (March), pp. 127–54.
- Sonin, Konstantin, 2003, “Why the Rich May Favor Poor Protection of Property Rights,” Journal of Comparative Economics, Vol. 31 (December), pp. 715–31.
- Skaperdas, Stergios, 1992, “Cooperation, Conflict, and Power in the Absence of Property Rights,” American Economic Review, Vol. 82, No. 4, pp. 720–39.
- Levi, Margaret, 1988, Of Rule and Revenue (Berkeley: University of California Press).
- North, Douglass Cecil, 1981, Structure and Change in Economic History (New York: Norton).
- North, Douglass Cecil, and Robert Paul, 1973, The Rise of the Western World: A New Economic History (Cambridge: University Press).
- Huntington, Samuel P., 1968, Political Order in Changing Societies (New Haven: Yale University Press).
- Olson, Mancur, 1971, The Logic of Collective Action; Public Goods and the Theory of Groups (Cambridge, Massachusetts: Harvard University Press).
- Wade, Robert, 1984, “Market for Public Office: Why the Indian State is not Better at Development,” Institute of Development Studies Discussion Paper No. 194 (Brighton: Institute of Development Studies).

### Human capital, occupational choice, and entrepreneurship
- Banerjee, Abhijit V., and Andrew F. Newman, 1993, “Occupational Choice and the Process of Development,” Journal of Political Economy, Vol. 101, No. 2, pp. 274–98.
- Baumol, William J., 1990, “Entrepreneurship: Productive, Unproductive, and Destructive,” Journal of Political Economy, Vol. 98, No. 5, Part 1, pp. 893–921.
- Hall, Robert E., and Charles I. Jones, 1999, “Why Do Some Countries Produce So Much More Output Per Worker Than Others?” Quarterly Journal of Economics, Vol. 114 (February), pp. 83–116.
- Banerjee, Abhijit V., and Andrew F. Newman, 1993, “Occupational Choice and the Process of Development,” Journal of Political Economy, Vol. 101, No. 2, pp. 274–98.
- Aghion, Philippe, and Patrick Bolton, 1993, “Theory of Trickle-Down Growth and Development with Debt-Overhang,” LSE Financial Markets Group Discussion Paper No. 170 (London, U.K: London School of Economics and Political Science).

*Source: _wp0543 - REFERENCES (PDF chapter/section).*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2005/_wp0543.pdf_