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Rule of Law and Factor Accumulation, 2005. 12-2 Rule of Law and Productivity: Rule of Law  Income … or vice versa?

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Presentation on theme: "Rule of Law and Factor Accumulation, 2005. 12-2 Rule of Law and Productivity: Rule of Law  Income … or vice versa?"— Presentation transcript:

1 Rule of Law and Factor Accumulation, 2005

2 12-2 Rule of Law and Productivity: Rule of Law  Income … or vice versa?

3 12-3 Growth of Government Spending, 1870–2005

4 Copyright © 2009 Pearson Education, Inc. Publishing as Pearson Addison-Wesley 12-4 The Tax Wedge: Inefficiency

5 Government Corruption Versus GDP per Capita, Does low corruption  Affluence..or vice versa? “I told you not to build roads. Building roads never did anything good.” Mobuto Sese Seko, Zaire Decentralized corruption: a Laffer-curve problem Centralized corruption: Lower rake  higher take.

6 Democracy and GDP per Capita Does democracy  Income…or vice versa? Barro: Too much democracy slows growth

7 World Bank: Doing Business, 2010 Rankings: Government: Helping hand…or grabbing hand? Starting up…p. 25 Construction permits…p. 31 Employing workers…p. 38 Registering property…p. 41 Protecting investors…p. 52 Paying taxes…p. 58 Exporting/importing…p. 63 Enforcing contracts…p. 69 Reformers…p. 18 Underground economy

8 Government Intervention in the Economy Planning and Public Enterprises –Allocating credit –“Infant industry” protection –Subsidies Providing jobs –Marketing boards –Currency controls  black market rates –Interest rate controls  negative real rates  financial repression Redistribution Equity vs. efficiency Kleptocracy Profligacy Budget deficits Inflation/inflation tax


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