Africa, Colonialism, Indirect rule, Colonial legacies, Ethnic conflict, D74, N47, O10,

No abstract

This study investigates the effect of inequality on economic growth in nondemocratic regimes. We provide a model in which a self-interested ruler chooses an institution that constrains his or her policy choice. The ruler must care about the support share of citizens in order to keep power. Under an extractive institution, the ruler can extract a large share of citizens' wealth, but faces a high probability of losing power because of low public support. We show that inequality affects the ruler's trade-off between the expropriation of citizens' wealth and his or her hold on power. Large inequality among citizens makes the support share for the ruler inelastic with respect to his or her choice of institution. Thus, the ruler chooses an extractive institution, which impedes investment and growth. These results provide an explanation for the negative relationship between inequality and growth and the negative relationship between inequality and the quality of institutions, both of which are observed in nondemocratic countries.JEL classification: O11, D31, P14, P16

This paper builds and calibrates a model of competitive search that can reproduce a set of stylized facts concerning major impacts of the decade long stagnation and subsequent changes in the labor market in Japan. We highlight the role played by varying degrees of relation specific investments in forming employment relations. By embedding such a system of employment in an economy plagued with limited capital mobility, we show that the macro technology shocks can generate upward drift in Beveridge curve, pro-longed periods of labor adjustments, decline in the share of jobs with costly investment in training, and strong cohort effects. The paper also simulates impacts of 'zombie' jobs, firing cost, and subsidy for training. Through these simulations we show that the combination of the macro technology shocks and high cost of re-training is responsible for the sluggish labor adjustment, shrinking core employment, and stagnant productivity.