Working Paper No. 07-13
A Theory of Social Transformation, Political Transition and Economic Growth
July 2007, updated April 2008
In this paper, I develop a model of sociopolitical transition that links sociopolitical transformational process of countries to the dynamic process of output per capita and economic growth. Social polarization breeds discriminatory practices regarding government redistribution. This brings about inefficient allocation of resources away from production to political power struggle leading to poor economic outcomes. However, the model shows that social integrative processes may correct this inefficiency over time depending on the degree of social fractionalization, the level of social distance between the groups, the level of production technology, etc. Even though the model predicts long-run convergence of growth rates and output per capita across countries, it shows possible prolonged divergence of these economic variables.
JEL classification: O41, O43
Keywords: economic growth, fractionalization, integration