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Author: | Mehlum, H. Moene, K. Torvik, R. |
Title: | Predator or prey? Parasitic enterprises in economic development |
Journal: | European Economic Review
2003 : APR, VOL. 47:2, p. 275-294 |
Index terms: | Economic development Crime Poverty Society Companies |
Language: | eng |
Abstract: | In many developing and transition economies, Mafia-like activities are rampant. Varying forms of predation lower profitability in private businesses and distort investment incentives. Incorporated in a model of industrialization, bimodal club convergence may result. Economies may get stuck in a Predators' Club characterized by a vicious cycle of poverty and predation. Societies with a low flow of new entrepreneurs are especially vulnerable to predation. Poor societies with a high flow of new entrepreneurs, however, may grow out of the trap and join the rich Producers' Club. |
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