When is a State Predatory?

Abstract:

I argue that the impact of development on the distribution of political power in society may create an incentive for a state to become 'predatory' and fail to promote economic development. I develop a model of endogenous policy choice where public investment, while socially productive, simultaneously increases the ability of agents outside the ruling group to contest political power. The model shows that ineffcient underinvestment (predatory behavior) tends to arise in societies where, (1) there are large benefits to holding political power, and which are, (2) well endowed which natural resources, (3) badly endowed with factors which are complementary to public investment, such as human capital, and (4) intrinsically unstable. I document the importance of the mechanism I propose in accounting for the behavior of actual predatory regimes.

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