Envy, Institutions and Growth

Abstract

The use of interdependent preferences provides an intuitive link between institutions and growth. Envious agents that care about relative wealth choose to use an available destruction technology to inflict harm on the wealth of other agents when institutions fail to make property rights secure, while they use a production technology to increase their wealth when institutions make it easy and hassle-free to engage in production. The use of interdependent preferences is justified by an extensive literature and can provide a motive for agents to take actions that block growth in the absence of theft or other concrete gains.