Predator or Prey: Parasite Enterprises in Economic Development

Peer-reviewed Journal Article

Moene, Karl Ove; Ragnar Torvik & Halvor Mehlum (2003) Predator or Prey: Parasite Enterprises in Economic Development, European Economic Review 47(2): 275–294.

​​​In many developing and transition economies Mafia-like activities are rampant. Extortion and other forms of predation lower profitability in private businesses and distort investment incentives. Incorporated in a model of industrialization, bimodal club convergence may result. Economies may get stuck in a Predators’ Club characterized by a vicious cycle of poverty and predation. Societies with a low flow of new entrepreneurs are especially vulnerable to predation and never get out of this club. Poor societies with a high flow of new entrepreneurs, however, may grow out of the trap and join the rich Producers’ Club.

Authors

Halvor Mehlum

Halvor Mehlum

Research Economist, Department of Economics, University of Oslo

Karl Ove Moene

Karl Ove Moene

Working Group Leader: Conflict and Economic Performance. Professor of Economics, University of Oslo

Ragnar Torvik

Ragnar Torvik

Professor of Economics NTNU