Departmental Bulletin Paper The Invisible Hand, the Helping Hand, and the Grabbing Hand: A Welfare Analysis

CAI, Dapeng

62 ( 4 )  , pp.53 - 60 , 2015-03-25 , 名古屋大学大学院経済学研究科
This note examines t he welfare impacts of interactions between policymakers and firms under three models of governments, namely, the invisible hand, the helping hand, and the grabbing hand. We show that under a benevolent grabbing hand government, social welfare can be higher than that of an invisible hand government, whereas when the policymakers are sufficiently avaricious, social welfare under a grabbing hand government can be lower than that of an invisible hand government. We also predict that the economies that are more vulnerable to a welfare-worsening political economy trap are those where the policymakers are less driven by welfare concerns.

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