Essays on institutions and economic development

This thesis is the collection of three independent studies that analyze the interplay between institutions and economic development. In Chapter 1, I examine the relationship between wealth inequality and institutions. I present a model of regulated entry where entrepreneurs form coalitions of potentially varying size to bribe the regulator. The prevalence of capture is thus determined by the distribution of wealth. In a dynamic framework and depending on initial conditions, the economy may be either on a path towards institutional change where inequality eventually vanishes; or, it may be on a path towards institutional sclerosis, which exhibits a polarization of society into two classes with a wealthy elite dominating the increasingly impoverished masses. Chapter 2 investigates the relationship between trade and financial development. I thus present a simple model of trade in the presence of factor market imperfections. I consider an economy in which entrepreneurs undertake projects, and in doing so, contribute to the development of financial institutions. Such spillover fails to be internalized so that trade potentially induces externality losses that outweigh allocative gains. Financial markets in poorer countries deteriorate as a consequence of specialization. Static inefficiencies are exacerbated in a dynamic framework, leading poorer countries to fall into a liquidity trap. The predictions of the model suggest that trade and financial liberalization should be undertaken simultaneously and that temporary protectionist policies can be welfare improving.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2002

Author dc:creator

• Do, Quy Toan, 1974-

Advisor dc:contributor.advisor

• Abhijit Banerjee and Simon Johnson.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/29927

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/29927