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Dictators and oligarchs: A dynamic theory of contested property rights

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Author Info
Guriev, Sergei
Sonin, Konstantin

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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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Publisher 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

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Keywords: Property rights Oligarchy Dictatorship Non-democratic politics;

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References listed on IDEAS
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  2. Robinson, James A., 1999. "When is a State Predatory?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich.
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  5. Besley, Timothy J. & Persson, Torsten, 2007. "The Origins of State Capacity: Property Rights, Taxation, and Politics," CEPR Discussion Papers 6370, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Grossman, Herschel I, 1994. "Production, Appropriation, and Land Reform," American Economic Review, American Economic Association, vol. 84(3), pages 705-12, June. [Downloadable!] (restricted)
  7. Daron Acemoglu, 2008. "Oligarchic Versus Democratic Societies," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 1-44, 03. [Downloadable!] (restricted)
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  8. Mark Gradstein, 2007. "Inequality, democracy and the protection of property rights," Economic Journal, Royal Economic Society, vol. 117(516), pages 252-269, 01. [Downloadable!] (restricted)
  9. Serguey Braguinsky & Roger Myerson, 2007. "A macroeconomic model of Russian transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(1), pages 77-107, 03. [Downloadable!] (restricted)
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  11. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112. [Downloadable!] (restricted)
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  14. Sonin, Konstantin, 2003. "Why the rich may favor poor protection of property rights," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 715-731, December. [Downloadable!] (restricted)
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