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Predator or Prey? Parasitic enterprises in economic development

Link to article:

[PDF]

Authors:

Mehlum, Halvor, Karl Moene and Ragnar Torvik

Year:

2000

Reference:

Memorandum
Number in series: 27

Summary

In many developing and transition economies Mafia-like activities are rampant. Extortion and other forms of predation lower profitability in private businesses and distortinvestmentincentives. Incorporated in a modelof industrialization, bimodal club convergence may result. Economies may get stuck in a Predators’ Club characterized by a vicious circle of poverty and predation. Societies with a low flow of new entrepreneurs are especially vulnerable to predation and never get out of this club. Poor societies with high flow of new entrepreneurs, however, may grow out of the trap and join the rich Producers’ Club.

JEL:

O1, O4

Keywords:

Poverty traps, Club convergence, Organized crime

Project:

Oppdragsgiver: Norges forskningsråd
Oppdragsgivers prosjektnr.:
Frisch prosjekt: 5101 - Liberalisation, poverty and redistribution / Inequality, Social Conflict, and Development