Sectorial public power and endogenous growth

Abstract

The concept of sectorial political economy is defined using a model of fragmented perfect competition and introduced in an dynamic game in which the government is a Stackelberg leader and the representative families of each sector follow. Sectors produce different bundles of goods by means of production functions which imply different kinds of economic dependencies and which may involve public inputs on which the government takes strategic decisions. The political power of each sector is described in terms of its passive resitance (resistance to taxation), its organized resistance (an effective demand for minimum welfare), and its socially organized power (the presence of its objectives in the government objetive funciton). The determinants of income distribution and growth, the mechanisms and incentives for the allocation of public goods, and the incentives for political organization, are functions of political power which are strikingly different if the economy is open of closed. The model analyzes long-term equilibria in political economy and tendencies for change in periods of political transition due to technical or trade policy changes.