بوروکراسی ها، نابرابری و رشد رانتخواری

This paper develops a Schumpeterian growth model in which institutional quality matters for inequality and growth. In particular, asymmetric information between political authorities and rent-seeking bureaucratic agencies diverts resources from innovative activities – crucial for development to take off in middle and low income countries – and unnecessarily exacerbates income inequality. The theoretical predictions not only match empirical facts on inequality, institutional quality and growth well documented in the literature, but are easily assessed in two groups of Latin American and African countries, as shown in the final calibration analysis.

The role of human capital accumulation and of technological catching up process for development to take off in both middle and low income countries is widely recognized. The Asian Development Bank (2007) ties theory to data finding that “the value of education in development depends on the scope for technology adoption.” The empirical cases show the existence of a two-way causal relationship between education and growth, conditional on the availability of new and better technology. One particularly arresting and relevant example concerns the Green Revolution period in India. Foster and Rosenzweig (1996) observed that “…more-educated households turned to high-yielding crop varieties (HYVs) more rapidly; those states that adopted HYVs experienced faster agricultural growth…”. In addition, Bils and Klenow (2000) calibrate a growth model to see if it can explain the education–growth linkage. They find that most of the causality from education to growth must be explained by the influence of education on technology. From a theoretical point of view, Galor (2000) shows that in a very early stage of economic development physical capital is a prime engine for growth, while in a subsequent stage of economic development human capital accumulation becomes a prime engine for growth. Acemoglu et al. (2006) underline the importance for middle and low income countries to improve the quality and the production process of their products to fill the gap between their technological stage with the technological frontier of developed economies, and to spur their growth performance. Zhu and Trefler (2005) utilize a cost-cutting process innovation to study the Southern technology catching up process. Therefore, human capital accumulation and technology adoption aimed to improve product quality and production processes are viewed as fundamental prerequisites allowing developing countries to take off with higher growth. During the development process, the high weight the public sector has in both production activities and employment policies in middle and low income countries is also documented. Agénor et al. (2007) analyze the role of public sector in the Middle East and North Africa (MENA) regions. The authors find that in developing countries the public sector has a fundamental role in keeping people employed. In particular, in the MENA region the Governments are often considered as ‘employers of first resort’ especially for people with middle and higher education levels, and in most labor-exporting MENA countries, the public sector is the dominant employer in the formal sector, with an average employment of around 36% on average. Panizza and Qiang (2005) find that in Latin American region around 35% of total employment in the formal sector has a public sector job. The same authors find that the average ability of the skilled labor force employed in the public sector is higher than the average ability of skilled labor employed in the private formal sector.1 Percentages such as these are considered high by international standards, and have led to substantial surplus labor throughout the public sector (see also Adams and Page, 2003). Esfahani (2000) shows that in the past two decades, the share of public enterprises in GDP has remained about 14% in low-income economies, while it has oscillated between 8% and 10% in middle income economies and declined from 9% to 7% in industrial economies. Similar trends emerge from a comparison of employment shares. Rama (2003) and Belser and Rama (2001) state that in some cases up to half of the workforce in state-owned enterprises needs to be considered redundant, if these enterprises are to be run as private firms. According to these empirical analyses, this paper develops a Schumpeterian ladder quality model with endogenous human capital accumulation,2 in which the role of an inefficient public sector is explicitly accounted for. Within this framework, this paper suggests a new theoretical channel going from institutional quality to inequality and growth, and it creates a bridge between two separate strands of empirical analyses that document the existence of both an inverse relationship between institutional quality and growth and an inverse relationship between inequality and growth. The role of institutional quality and good governance as key elements for the development and growth effectiveness of both developing and developed countries has recently been emphasized by both theoretical and empirical analyses.3 Moreover, several empirical works underline the importance of good institutional quality for the efficiency of public sector expenditures. For example, it has been argued that merely allocating public resources to the right goods and services may not lead to desirable outcomes if budget institutions are malfunctioning (World Bank, 1999). As Rajkumar and Swaroop (2002) write: “well-functioning public institutions are critical for translating public spending into effective services.” Although, the quality of public institutions is measured in a variety of ways, this work focuses on bureaucratic quality and corruption. The empirical analyses prove that bad bureaucratic quality harms both the growth performance and productivity of both developed and developing countries.4 In studying the empirical relationship between corruption and productivity, Lamsdorff, 2003 and Lamsdorff, 2004 writes: “the crucial reason why corruption has an adverse impact on productivity is related to accompanying low levels of bureaucratic quality… Once including bureaucratic quality into the regressions, the influence exerted by corruption becomes insignificant. This suggests that the adverse impact of corruption on productivity largely runs via its correlation with lack bureaucratic quality.”5 From a theoretical point of view, a recent paper by Sarte (2001) suggests that the adverse effect a more inefficient bureaucracy has on economic growth depends not only on the interaction between the bureaucracies and the private market, but also on the political authority's interactions with its executive agencies. This means that the growth effects of government spending are partially linked to the agency problem between political authority and its bureaucracy. In this framework, individuals with heterogeneous ability endogenously choose to acquire skills or to remain unskilled. The government – i.e. the political authority – uses tax proceeds levied on consumers to supply a subset of the existing goods and services to final consumers. However, these publicly provided products are acquired through bureaucratic agencies. Public sector inefficiency shows up at this level. The bureaus have an informational advantage over the political authority about the quality of final products, and they act to maximize their discretionary budget.6 The government attempts to limit this informational gap through oversight agencies, with the aim of economizing on total government outlays. The public sector inefficiency generates a waste of resources by diverting them from productive activities toward unproductive ones. This wasting concerns both skilled and unskilled resources and negatively affects income inequality, consumption level inequality between skilled and unskilled workers, and the per capita output growth rate of the economy. Therefore, an inverse relationship between inequality and growth due to bad institutional quality emerges. The existence of such an inverse relationship is documented by the empirical evidence. In their seminal paper, Persson and Tabellini (1994) showed that inequality harms the growth performance of a country. Although the existence of a negative relationship between inequality and growth is not unanimously recognized in the literature, in a recent paper Banerjee and Duflo (2003) maintain: “…the conclusions of Forbes (2000) and Li and Zou (1998) are not warranted: there is no evidence in the data that increases in inequality are good for growth. In fact, the bulk of the evidence goes in the opposite direction.”7 Although these mechanisms can be at work in both developed and developing economies – as also indicated by empirical analyses – they can be more severe in middle and low income countries. In such economies, the technological catching up requires a cost to adapt the top quality products existing elsewhere to local conditions and customs. The adaptation of the state-of-the-art products is an endogenous process that needs skills and human capital accumulation.8 Therefore, bad bureaucratic quality produces a waste of relatively scarce resources that can severely exacerbate income inequality, and can damage the development performance of such countries. This adverse effect can be exacerbated by the relatively higher weight of an inefficient public sector in the economy.9Esfahani (2000) proves that a larger administrative weakness – measured as a higher cost of the government for monitoring and controlling a given activity – can explain the larger state ownership in developing countries. Forteza and Rama (2006) empirically analyze the effect of labor market rigidity on the GDP growth. They specify that in dealing with aggregate rigidity, it is important to keep in mind the limited enforcement capabilities of many developing countries. The authors find that one of the two measures for the labor market rigidity having the strongest adverse effect on GDP growth rates is government employment (the other being trade union). In studying the robustness of their results, Forteza and Rama (2006) state that compliance is in principle much higher in industrial countries than in developing ones, and find that lack of corruption, law and order, and a better quality of bureaucracy weakens the adverse effect of labor market rigidity (one of the most important measures is public employment) on growth. Therefore, the existence of bad bureaucratic quality and corruption in developing countries could be a bigger problem than in developed ones.10 Finally, this work adds some new results to the existing literature on institutional quality and the efficiency of public expenditures within a Schumpeterian growth framework. Cozzi (2001) shows that better institutional quality – in the form of a tighter patent protection – increases both growth rate and inequality. However, Cozzi (2001) only considers intellectual property rights enforcement as a measure of public sector efficiency in developed economies, and he does not consider human capital accumulation. Easterly et al. (1994) describe the technology adoption of developing countries with a variety proliferation model, and they evaluate the growth effect of different policies (fiscal, monetary, exchange rate, etc.). In their model the adoption of a new variety coincides with the human capital accumulation – through a learning by doing process – that allows the use of latest intermediate good. The labor force is homogeneous, and the labor market does not play any role in the mechanisms and results of the model. In this set up the technological catching up is described as a ladder quality innovation process. It generates a creative destruction effect – absent in a variety proliferation model – that drives some important results on both inequality and development. Moreover, in this paper human capital accumulation is the result of an endogenous choice of heterogeneous individuals that generates a double labor market, unskilled and skilled. This sheds light on the labor market mechanisms – both unskilled and skilled – to evaluate the effect of bad institutional quality on inequality, technological upgrading and growth. The importance of shedding light on the labor market mechanism is also underlined in other works. In analyzing the effects of globalization on the economic performance of developing countries, Rama (2003) finds that the key issue is to asses the labor market impact of the overall package. Zhu and Trefler (2005) explains the rising wage inequality between skilled and unskilled labor in developing countries as a result of a higher demand for skilled workers. Forteza and Rama (2006) underline the adverse effect labor market rigidity – strongly dependent on public employment, bureaucratic quality and corruption – has on GDP growth rate. The paper is organized as follows. Section 2 sets up the model. Section 3 derives the balanced growth properties of the economy. Section 4 draws the effects of a more inefficient public sector, and compares the results with the benchmark case of an efficient public sector. In the last part of section 4 a calibration of the model that compares the structural differences between developed and developing countries is conducted. Section 5 draws conclusions.

The adverse effect that bad bureaucratic quality and corruption have on the growth performance of both developed and less developed economies is widely documented by empirical analyses. In addition, the existence of an inverse relationship between inequality and growth is also recognized. This paper merges these two strands of empirical findings and suggests a new theoretical channel going from institutional quality to inequality and then growth. According to empirical evidence that underlines the role of the technological catching up process and of human capital accumulation for the development of middle and low income countries, a Schumpeterian ladder quality model with endogenous human capital accumulation is adopted, in which technological catching up consists in imitation and adaptation to local conditions and customs of top quality products (or production processes) discovered elsewhere. Moreover, because the public sector has a relatively high weight in such economies, it is explicitly accounted for in the model. To study the role of institutional quality on inequality and growth an agency problem between the political authority and a better informed and rent-seeking bureaucracy is considered. The government uses bureaucratic agencies to acquire final goods and services supplied to final consumers. Because of the informational advantage of bureaus over political authority and corruption phenomena, the government needs to waste resources to monitor the rent-seeking and corrupted bureaus. It is shown that a higher public sector inefficiency diverts a higher share of both skilled and unskilled resources from productive activities – manufacturing and innovation – towards unproductive ones. This waste widens wage inequality, and negatively affects the aggregate rate of innovation (imitation and adaptation), and the per-capita output growth rate. Furthermore, more inefficiency also determines higher inequality in relative consumption levels between unskilled and skilled workers. By comparing these results with the benchmark case of an efficient public sector – i.e. a full information environment – it is proven that in this last case the economy has lower income inequality, lower consumption level inequality between skilled and unskilled workers, lower fiscal burden on all consumers, and a better growth and development performance. Although these causal mechanisms can be valid for both developed and less developed economies, they are far more severe in middle and low income countries. In these countries, skills and human capital are relatively scarce resources, and the government has a relatively higher weight than in developed countries. Therefore, the inefficiency in the public sector generates a waste of relatively scarce resources such as skilled workers, exacerbates income inequality, and worsens the development performance. The final calibration comparing these economic mechanisms for a developed economy – the U.S. – with two groups of respectively Latin American and African countries shows that both the groups have a structurally higher public sector inefficiency than the developed economy. Moreover, the calibration confirms the theoretical predictions of the model and shows that the adverse effect strength of bad institutional quality on inequality and growth also depends on the development stage of a country.