Working Paper: NBER ID: w9150
Authors: Edward Glaeser; Jose Scheinkman; Andrei Shleifer
Abstract: In many countries, the operation of legal, political and regulatory institutions is subverted by the wealthy and the politically powerful for their own benefit. This subversion takes the form of corruption, intimidation, and other forms of influence. We present a model of such institutional subversion focusing specifically on courts and of the effects of inequality in economic and political resources on the magnitude of subversion. We then use the model to analyze the consequences of institutional subversion for the law and order environment in the country, as well as for capital accumulation and growth. We illustrate the model with historical evidence from Gilded Age United States and the transition economies of the 1990s. We also present some cross-country evidence consistent with the basic prediction of the model.
Keywords: No keywords provided
JEL Codes: K40; K42; O17; O40; P51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Inequality (D63) | Institutional Subversion (P37) |
| Institutional Subversion (P37) | Economic Growth (O49) |
| Inequality (D63) | Economic Growth (O49) |
| Weak Institutions (O17) | Inequality (D63) |
| Wealth Concentration (D31) | Institutional Weakness (O17) |
| Political Contributions (D64) | Legal Environment Favoring the Rich (P14) |