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Dictators and oligarchs: A dynamic theory of contested property rights

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  • Guriev, Sergei
  • Sonin, Konstantin

Abstract

In an economy with weak economic and political institutions, the major institutional choices are made strategically by oligarchs and dictators. The conventional wisdom presumes that as rent-seeking is harmful for oligarchs themselves, institutions such as property rights will emerge spontaneously. We explicitly model a dynamic game between the oligarchs and a dictator who can contain rent-seeking. The oligarchs choose either a weak dictator (who can be overthrown by an individual oligarch) or a strong dictator (who can only be replaced via a consensus of oligarchs). In equilibrium, no dictator can commit to both: (i) protecting the oligarchs' property rights from the other oligarchs and (ii) not expropriating oligarchs himself. We show that a weak dictator does not limit rent-seeking. A strong dictator does reduce rent-seeking but also expropriates individual oligarchs. We show that even though eliminating rent-seeking is Pareto optimal, weak dictators do get appointed in equilibrium and rent-seeking continues. This outcome is especially likely when economic environment is highly volatile.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 1-2 (February)
Pages: 1-13

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:1-2:p:1-13

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Property rights Oligarchy Dictatorship Non-democratic politics;

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Cited by:
  1. Daron Acemoglu & James A. Robinson, 2013. "Economics versus Politics: Pitfalls of Policy Advice," NBER Working Papers 18921, National Bureau of Economic Research, Inc.
  2. Daniel Leonard & Ngo Van Long, 2012. "Endogenous Changes in Property Rights Regime," The Economic Record, The Economic Society of Australia, vol. 88(280), pages 79-88, 03.
  3. Guimarães, Bernardo & Sheedy, Kevin D., 2012. "A Model of Equilibrium Institutions," CEPR Discussion Papers 8855, C.E.P.R. Discussion Papers.
  4. Li, Yuan & Gilli, Mario, 2014. "Accountability in Autocracies: The Role of Revolution Threat," Working Paper Series 2014-30, Stockholm China Economic Research Institute, Stockholm School of Economics, revised 06 Mar 2014.
  5. Gehlbach, Scott & Keefer, Philip, 2011. "Investment without democracy: Ruling-party institutionalization and credible commitment in autocracies," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 123-139, June.
  6. Van Long, Ngo, 2013. "The theory of contests: A unified model and review of the literature," European Journal of Political Economy, Elsevier, vol. 32(C), pages 161-181.
  7. Pino, Francisco J. & Vidal-Robert, Jordi, 2014. "Habemus Papam? Polarization and Conflict in the Papal States," CAGE Online Working Paper Series 189, Competitive Advantage in the Global Economy (CAGE).

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