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Declining Predation during Development: a Feedback Process
Author(s) -
Bethencourt Carlos,
PereraTallo Fernando
Publication year - 2015
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/ecca.12105
Subject(s) - incentive , economics , productivity , elasticity of substitution , predation , capital (architecture) , empirical evidence , capital accumulation , labour economics , human capital , microeconomics , market economy , biology , ecology , macroeconomics , production (economics) , history , philosophy , archaeology , epistemology
Empirical evidence suggests that poorer countries have larger amounts of predation. We formulate a neoclassical growth model in which agents devote time to either produce or predate. When the elasticity of substitution between labour and capital is lower than one, the labour share rises with capital, reducing the incentive to predate and increasing the incentive to produce throughout the transition. Consequently, a feedback process between capital accumulation and predation arises, which amplifies income differences generated by differences in productivity. This paper helps to explain why differences between countries have remained stable and the key role that institutions play in development.