Sectoral reallocation, distributional coalitions and the welfare state as determinants of economic growth rates in industrialized democracies

Abstract. This paper investigates three propositions about economic growth. It rejects the proposition that differences in the size of the agricultural sector or in opportunities to reallocate resources from this sector to other sectors of the economy significantly contribute to the explanation of differential growth rates among industrialized democracies. It supports Olson's proposition that long lasting democracies suffer from an accumulation of distributional coalitions whose rent-seeking activities retard economic growth. It also supports the proposition that the welfare state contributes to economic decline. Technically, this paper applies cross-sectional and pooled regression analyses of growth rates on employment in agriculture as a percentage of civilian employment, age of democracy, and social security transfers as a percentage of GDP. Data refer to the 1960–82 period and 19 nations.