Redistribution to Rent Seekers, Foreign Aid and Economic Growth

Hodler, Roland (April 2004). Redistribution to Rent Seekers, Foreign Aid and Economic Growth (Discussion Papers 04-06). Bern: Department of Economics

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This paper analyzes the consequences of redistribution of public funds to rent seekers. Therefore, it introduces redistribution to rent seeking agents into Barro’s (1990) endogenous growth model with a productive public sector. It shows that the growth rate decreases in the share of the public funds that is redistributed. The public sector’s relative sizes that
maximize growth and welfare become also smaller in presence of redistribution. Further, if foreign aid is added to the model, the relationship between aid and growth turns out to be inverted-U shaped under reasonable policy assumptions, which is consistent with the finding of an Aid Laffer Curve by some recent empirical studies.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Hodler, Roland

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

14 Sep 2020 15:14

Last Modified:

14 Sep 2020 15:14

JEL Classification:

D72, D9, F35, H30

BORIS DOI:

10.7892/boris.145638

URI:

https://boris.unibe.ch/id/eprint/145638

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