The Rise and Fall of Elites: A Theory of Economic Development and Social Polarization in Rent-Seeking Societies

CEPR Discussion Paper Series Number 1495

Posted: 16 Sep 1999

See all articles by Thierry Verdier

Thierry Verdier

Paris School of Economics (PSE); Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; Centre for Economic Policy Research (CEPR)

Alberto Ades

Goldman Sachs Group, Inc.

Date Written: November 1996

Abstract

This paper analyses how political institutions, wealth distribution and economic activities affect each other during the process of development. A simple general equilibrium model of rent-seeking political elites with two productive sectors (modern and traditional) is presented. Political participation is viewed as a costly activity. We show what drives entry into politics and how the size of the elite affects the level of distortions. The model also highlights the role played by the initial distribution of wealth in determining the long-run pattern of political participation and economic performance. We show why one society may converge to an equilibrium with low distortions and social equality, while others may end up with an institutional framework that brings about high distortions and social polarization. The model is then extended to account for the provision of public goods, to analyse the effects of rent-seeking on technological change, and to allow for random shocks in intergenerational transfers.

JEL Classification: D31, D72, O10

Suggested Citation

Verdier, Thierry and Ades, Alberto, The Rise and Fall of Elites: A Theory of Economic Development and Social Polarization in Rent-Seeking Societies (November 1996). CEPR Discussion Paper Series Number 1495, Available at SSRN: https://ssrn.com/abstract=5172

Thierry Verdier (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014
France

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alberto Ades

Goldman Sachs Group, Inc.

85 Broad Street
New York, NY 10004
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
2,429
PlumX Metrics