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Political Competition Between Countries and Economic Growth
Author(s) -
Chaudhry Azam,
Garner Phillip
Publication year - 2006
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2006.00341.x
Subject(s) - economics , politics , incentive , fell , competition (biology) , stimulus (psychology) , developing country , market economy , international economics , economic system , international trade , political economy , economic growth , political science , psychology , paleontology , ecology , law , psychotherapist , biology
Political competition between European countries has been viewed as being a stimulus to the innovation process and part of the reason why Europe was the first region of the world to experience sustained growth. Countries that fell behind their rivals technologically and economically became more vulnerable to exploitation. In this way, the presence of rival states provided added incentive to innovate. This paper uses a simple model of conflict between countries to study the role of political competition in economic growth. The governments of each country are threatened politically by innovation and, hence, face a trade‐off between the stability of their regime and keeping up with their rivals. The model shows that “institutional spillovers,” such as a decrease in the level of rent‐seeking in one country, can affect growth in a competing country. Thus, political fragmentation can be growth enhancing as it can result in more political competition.