1. Economic Growth David N. Weil Chapter 12: Government
« Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things”
Adam Smith, 1755
Jérôme Carai-Beaufils
Joanna Poënset

2. Presentation Introduction
Defining Government’s Proper Role In The Economy
How Government Affects Growth?
Why Governments Do Things That Are Bad For Growth?
Why Poor Countries Have Bad Governments?
Conclusion

3. Introduction How can governments affect economic growth?
=>looking to pairs of countries similar except governments.
=>looking at its policies changes within a country
Normative and Positive Approaches

4. Defining Government’s Proper Role In The Economy (1)
The Case For Government Intervention In The Economy
=> Market Failure
Public goods, Externalities, Monopolies and Coordination failures
=> Income Redistribution

5. Defining Government’s Proper Role In The Economy (2)
The Case Against Government Intervention In The Economy
Inefficiency of the Government to resolve Market Failures
=> Equity-Efficiency Trade-Off

6. Defining Government’s Proper Role In The Economy (3)
Swings of the Pendulum
Around the 1st World War: Active Role of Governments in Economic Development
Last Decades of 20th Century: Shift Away from Governments Control of the Economy

7. How Government Affects Growth (1)? Normative Approach
Rule of Law
=>Rule of Law = Public Good
“Rule of Law and Factors Accumulation, 2005”

8. How Government Affects Growth(2)? Normative Approach
Rule of Law
“ Rule of Law and Productivity“

9. How Government Affects Growth(3)? Normative Approach
Taxation, Efficiency and the Size of Government
“Effect of a Tax”

10. How Government Affects Growth(4)? Normative Approach
Taxation, Efficiency and the Size of Government
“Growth of Government Spending ”

11. How Government Affects Growth(5)? Normative Approach
Planning and other industrial policies
State Enterprises
Marketing Boards
Trade Restrictions

12. Why Governments Do Things That Are Bad For Growth(1)? Positive Approach
Some Others Goals:
Population Welfare
Prevent Further Costs in the Future
Income Redistribution

13. Why Governments Do Things That Are Bad For Growth(2)? Positive Approach
Corruption and Kleptocracy
“Government Corruption versus GDP per Capita, 2005”

14. Why Governments Do Things That Are Bad For Growth(3)? Positive Approach
Self Preservation
=>Keep the Government in Power
Russia in 19th Century
Mobutu in Zaïre
=>But lack of growth can also threaten a government’s survival

15. Why Poor Countries Have Bad Governments(1)?
Causation running from Income to Government Quality
Bad Government have not always an Impediment to Economic Growth
Quality of Government often Improves in Response to Growing Income

16. Why Poor Countries Have Bad Governments(2)?
Causation running from Government Quality to Income
=>Bad Government: A Cause rather than an Effect of Economic Underdevelopment
=>Governments issued from Colonialism

17. Conclusion Incentives of Government Interventions
What should the Government do?
=>Normative Approach
Why does the Government do what it does?
=>Positive Approach
A Bond between Poverty and Bad Governments