Abstract
I develop a model of exploitation—coercive wealthtransfer—and growth based on social importance. Exploitationreduces growth since the return to capital falls with exploitationcosts. Initial relative wealth across groups—the measureof social importance—determines which group is the exploiterand how costly exploitation will be. The exploiter selects anexploitation path that maintains its dominant position and rarelymaximizes current transfers. Productive minorities and fast-growinggroups are most prone to exploitation. International sanctions,if strong, end exploitation; otherwise they increase exploitationand reduce growth. Segregation and apartheid are broadly consistentwith the theory.
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McDermott, J. Exploitation and Growth. Journal of Economic Growth 2, 251–278 (1997). https://doi.org/10.1023/A:1009730825259
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DOI: https://doi.org/10.1023/A:1009730825259