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When Government Spending Serves the Elites: Consequences for Economic Growth in a Context of Market Imperfections

Author

Listed:
  • Lopez, Ramon E.
  • Islam, Asif M.
Abstract
Government spending should be regarded as a social and political phenomenon, not merely as a technical choice. We argue that there is an implicit contract between the organized elites and politicians which often leads to a pro-elite allocation of public resources. A natural and simple taxonomy of government spending follows from this view: spending in public goods broadly defined which mitigate market failures versus spending in non-social subsidies, mainly a vehicle to serve the elites. We theoretically and empirically show that pro-elite spending biases are costly in terms of economic growth. The empirical findings are exceptionally robust.

Suggested Citation

  • Lopez, Ramon E. & Islam, Asif M., 2008. "When Government Spending Serves the Elites: Consequences for Economic Growth in a Context of Market Imperfections," Working Papers 45875, University of Maryland, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:umdrwp:45875
    DOI: 10.22004/ag.econ.45875
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    Cited by:

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    3. World Bank, 2009. "Belarus Agricultural Productivity and Competitiveness : Impact of State Support and Market Intervention," World Bank Publications - Reports 18897, The World Bank Group.
    4. Lopez, Ramon E. & Galinato, Gregmar I. & Islam, Asif M., 2009. "Pollution and the State: The Role of the Structure of Government," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 48055, Australian Agricultural and Resource Economics Society.
    5. Lopez, Ramon, 2009. "Natural disasters and the dynamics of intangible assets," Policy Research Working Paper Series 4874, The World Bank.
    6. Hua, Yue & Xie, Rui & Su, Yaqin, 2018. "Fiscal spending and air pollution in Chinese cities: Identifying composition and technique effects," China Economic Review, Elsevier, vol. 47(C), pages 156-169.
    7. Badiane, Ousmane & Ulimwengu, John, 2009. "The growth-poverty convergence agenda: Optimizing social expenditures to maximize their impact on agricultural labor productivity, growth, and poverty reduction in Africa," IFPRI discussion papers 906, International Food Policy Research Institute (IFPRI).

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    Keywords

    International Development; Labor and Human Capital; Political Economy; Public Economics;
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