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Democracy, collective action and intra-elite conflict

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Author Info
Ghosal, Sayantan
Proto, Eugenio

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Abstract

We analyze a model where there is uncertainty about the future power of two ex-ante symmetric elites to appropriate surplus, and ex-ante surplus sharing agreements are not binding. We show that in an oligarchy, the stronger elite appropriates the entire available surplus, whereas a democracy results in a more balanced surplus allocation between the two elites. In a democracy, the newly enfranchised non-elite organize to act collectively, so that the weaker elite can credibly threaten to form a coalition with the organized non-elite against the stronger elite. Such a threat ensures that the more balanced surplus sharing proposal chosen by majority voting is renegotiation-proof. Therefore, sufficiently risk-averse elites unanimously choose democracy as a form of insurance against future imbalances in relative power. We emphasize that franchise extension to, and low cost of organizing collective political activity for, the non-elite are both necessary features of a democracy. Our formal analysis can account for the stylized facts that emerge from a comparative analysis of Indian and Western European democracies.

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File URL: http://www.sciencedirect.com/science/article/B6V76-4WGVPP7-1/2/9e08511858c9b9aba60cbe308ccb31bb
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Publisher Info
Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 9-10 (October)
Pages: 1078-1089
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Handle: RePEc:eee:pubeco:v:93:y:2009:i:9-10:p:1078-1089

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

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Keywords: Democracy Conflict Collective action Coalition formation Party formation Bargaining Risk-sharing;

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  1. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005. "Income and Democracy," CEPR Discussion Papers 5273, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Torsten Persson & Guido Tabellini, 2006. "Democratic Capital: The Nexus of Political and Economic Change," NBER Working Papers 12175, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384.
  4. Justman, Moshe & Gradstein, Mark, 1999. "The Industrial Revolution, Political Transition, and the Subsequent Decline in Inequality in 19th-Century Britain," Explorations in Economic History, Elsevier, vol. 36(2), pages 109-127, April. [Downloadable!] (restricted)
  5. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September. [Downloadable!] (restricted)
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  6. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2008. "Coalition Formation in Non-Democracies," Review of Economic Studies, Blackwell Publishing, vol. 75(4), pages 987-1009, October. [Downloadable!] (restricted)
  7. Charness, Gary & Jackson, Matthew O., 2007. "Group play in games and the role of consent in network formation," Journal of Economic Theory, Elsevier, vol. 136(1), pages 417-445, September. [Downloadable!] (restricted)
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  8. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October. [Downloadable!] (restricted)
  9. Daron Acemoglu & James A. Robinson, 2000. "Why Did The West Extend The Franchise? Democracy, Inequality, And Growth In Historical Perspective," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1167-1199, November. [Downloadable!] (restricted)
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  10. Alessandro Lizzeri & Nicola Persico, 2004. "Why Did the Elites Extend the Suffrage? Democracy and the Scope of Government, With an Application to Britain's "Age of Reform"," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 705-763, May. [Downloadable!] (restricted)
  11. John P. Conley & Akram Temimi, 2001. "Endogenous Enfranchisement When Groups' Preferences Conflict," Journal of Political Economy, University of Chicago Press, vol. 109(1), pages 79-102, February. [Downloadable!] (restricted)
  12. Daron Acemoglu & James A. Robinson, 2006. "Persistence of Power, Elites and Institutions," NBER Working Papers 12108, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)
  14. Bertocchi, Graziella & Spagat, Michael, 1999. "The Politics of Cooptation," CEPR Discussion Papers 2156, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Aidt, T.S. & Dutta, Jayasri & Loukoianova, Elena, 2006. "Democracy comes to Europe: Franchise extension and fiscal outcomes 1830-1938," European Economic Review, Elsevier, vol. 50(2), pages 249-283, February. [Downloadable!] (restricted)
  16. repec:cup:cbooks:9780521671422 is not listed on IDEAS
  17. Erwin Tiongson & Luiz de Mello, 2003. "Income Inequality and Redistributive Government Spending," IMF Working Papers 03/14, International Monetary Fund. [Downloadable!]
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