The state's interest seeking and economic stagnation in the third world: Cross-national evidence

In the development literature, the state's interest seeking is considered a crucial determinant of economic stagnation in the Third World. The internality inefficiency, opportunity costs, and structural disincentives generated by such a state constitute the key mechanisms responsible for slow growth. This study provides a major quantitative test of this hypothesis. A. sectoral approach is proposed to measure the interest seeking of the state by using the central government expenditures for state;employees' wages and salaries as an indicator. As the analysis of pooled data from fifty-five less-developed countries reveals, high expenditures on salaries impeded the GDP growth rate in 1970-1990. In response to the argument that the African economy is more vulnerable to state predation, this regional effect hypothesis is further tested with an interaction model. The results reveal that the harmful growth effect of the state's interest seeking cuts across varied regions and can be generalized.