On the political economy of a backward region

Abstract

Purpose

The purpose of this paper is to develop a political economy model for a less developed region where a significantly large number of people belonging to the informal sector depend on political favours for their survival due to ill‐defined property rights. The purpose is to show that in such a scenario, democracy and political competition might lead to economic stagnation.

Design/methodology/approach

The arguments in the paper are represented in terms of a theoretical model.

Findings

The central result is that the party with a better political organization will have the incentive to maximize the size of the informal sector, which will also maximize its probability of winning. In equilibrium this party choosing anti‐development policies will have a higher probability to be in power. Thus universal franchise may lead to inefficiencies in such economies. These inefficiencies stem from ill‐defined property rights in the informal sector.

Originality/value

This paper is an original contribution to the class of political economy models of less developed countries.

Citation

Sarkar, A. (2010), "On the political economy of a backward region", Indian Growth and Development Review, Vol. 3 No. 2, pp. 122-137. https://doi.org/10.1108/17538251011084455