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REVENUE TRAPS
Author(s) -
GEHLBACH SCOTT
Publication year - 2007
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/j.1468-0343.2007.00303.x
Subject(s) - revenue , productivity , trap (plumbing) , tax revenue , production (economics) , business , politics , resource allocation , state (computer science) , economics , resource (disambiguation) , market economy , monetary economics , natural resource economics , public economics , microeconomics , finance , economic growth , political science , computer network , algorithm , environmental engineering , law , computer science , engineering
When state officials care about tax revenue and factors of production are mobile across economic sectors, political economies organize themselves into equilibria where officials promote sectors to which resources are allocated, which in turn encourages that resource allocation. Differences across sectors in the ability of officials to extract revenues may result in a “revenue trap”: the persistence of a low‐productivity equilibrium even in the presence of large shocks to resource allocation. I argue that the failure of privatization in part of the postcommunist world to effect a shift toward new private economic activity resulted in part from such a trap.