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The Natural Economic Advantage of Dictatorship over Democracy: A “Gresham's Law” of Governance

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Author Info
Omar Azfar ()
Martin Mcguire ()

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Abstract

We show that when democratic and autocratic governments peacefully compete for governance over the same jurisdiction the autocratic has a natural advantage. The autocratic government, which unambiguously reduces welfare for everyone except the autocrat, will drive the competing democratic government to voluntarily shut down in the interests of its own electorate. For instance, if an autocratic government allows the creation of democratic local governments, with the authority to tax and spend at will, these democratic local governments will remain inert and ineffective: A “Gresham's Law of Political Economy.” Copyright Kluwer Academic Publishers 2002

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File URL: http://hdl.handle.net/10.1023/A:1016520104397
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Publisher Info
Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 9 (2002)
Issue (Month): 4 (August)
Pages: 451-463
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Handle: RePEc:kap:itaxpf:v:9:y:2002:i:4:p:451-463

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Web page: http://www.springerlink.com/link.asp?id=102915

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Related research
Keywords: autocracy; constitutional economics; decentralization; democracy; development; dictatorship; governance; political economy; public choice; public goods; rent seeking; social contract;

References listed on IDEAS
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  1. Martin C. McGuire & Mancur Olson Jr., 1996. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 72-96, March. [Downloadable!] (restricted)
  2. Olivier Blanchard & Andrei Shleifer, 2000. "Federalism with and without Political Centralization: China versus Russia," NBER Working Papers 7616, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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This page was last updated on 2009-12-10.

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