The voracity effect

We analyse an economy that lacks a strong legal-political institutional infrastructure and is populated by multiple powerful groups. Powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock. In equilibrium, this leads to slow economic growth and a ''voracity effect" by which a shock such as a terms of trade windfall, perversely generates a more-than-proportionate increase in fiscal redistribution and reduces growth We also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks.