Why are some countries perpetually trapped in poverty while others develop and make the leap? An influential literature in political economics suggests that an important cause of under-development is the practice of choosing sub-optimal policies that lead to severe economic distortions. One prominent example of such potentially inefficient policy is regional favoritism -- the distortion of policies by the government to the benefit of selected regions or groups at the expense of the country as a whole. This project studies the effects of favoritism on individuals and firms in a large set of developing countries. Using this micro-economic evidence, the project then asks why governments engage in such suboptimal policies.
This project is financed by the DFG, for further information see