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Populist Policies in the Transition to Democracy

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  • Daniel Mejía

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  • Carlos Esteban Posada

    ()

Abstract

This paper develops a political economy model that provides an explanation as for why ruling elites in oligarquic societies may rely on income redistribution to the poor (the masses) in order to prevent them from attempting a revolution. We refer to this kind of redistribution as populist redistribution because, first it does not increase the poor’s productive capacity (human capital), and second it seeks to “buy” political support (peace) to perpetuate the elite’s control of political power. We examine the conditions under which ruling elites choose to deter the poor (by means of military repression and/or populist redistribution), to engage in a dispute with the poor for the control of political power, or, alternatively, to extend democracy. According to the results of the model populist redistribution (or military repression), if any, increases with initial wealth inequality and with the amount of redistribution that the poor can undertake under democracy, and decreases with the relative importance of a human capital externality in production. The model explains why in some cases the use of an apparently ine cient policy of populist redistribution turns out to be optimal for both groups (the ruling elite and the poor class) when the alternative is to use of military repression or default to conflict.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 349.

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Handle: RePEc:bdr:borrec:349

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Keywords: This paper develops a political economy model that provides an explanation as for why ruling elites in oligarquic societies may rely on income redistribution to the poor (the masses) in order to prevent them from attempting a revolution. We refer to this kind of redistribution as populist redistribution because; first it does not increase the poor’s productive capacity (human capital); and second it seeks to “buy” political support (peace) to perpetuate the elite’s control of political power. We examine the conditions under which ruling elites choose to deter the poor (by means of military repression and/or populist redistribution); to engage in a dispute with the poor for the control of political power; or; alternatively; to extend democracy. According to the results of the model populist redistribution (or military repression); if any; increases with initial wealth inequality and with the amount of redistribution that the poor can undertake under democracy; and decreases with the relative importance of a human capital externality in production. The model explains why in some cases the use of an apparently ine cient policy of populist redistribution turns out to be optimal for both groups (the ruling elite and the poor class) when the alternative is to use of military repression or default to conflict.;

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References

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  1. Daron Acemoglu, 2007. "Oligarchic Versus Democratic Societies," Carlo Alberto Notebooks, Collegio Carlo Alberto 47, Collegio Carlo Alberto.
  2. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, American Economic Association, vol. 83(5), pages 1184-98, December.
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  18. Pedro Dal bó, 2004. "Workers, Warriors and Criminals: Social Conflict in General Equilibrium," Econometric Society 2004 Latin American Meetings, Econometric Society 341, Econometric Society.
  19. Ian Morris, 2004. "Economic Growth in Ancient Greece," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 160(4), pages 709-, December.
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  23. Daron Acemoglu, 2003. "The Form of Property Rights: Oligarchic vs. Democratic Societies," NBER Working Papers 10037, National Bureau of Economic Research, Inc.
  24. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 914-27, October.
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Citations

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Cited by:
  1. Galor, Oded, 2012. "Inequality, Human Capital Formation and the Process of Development," IZA Discussion Papers 6328, Institute for the Study of Labor (IZA).
  2. Jennings, Colin, 2011. "The good, the bad and the populist: A model of political agency with emotional voters," European Journal of Political Economy, Elsevier, Elsevier, vol. 27(4), pages 611-624.
  3. Oded Galor, 2009. "Inequality and Economic Development: An Overview," Working Papers 2009-3, Brown University, Department of Economics.
  4. Begovic, Boris & Paunovic, Marko, 2011. "Political support for enterprise restructuring and voting in Serbia," European Journal of Political Economy, Elsevier, Elsevier, vol. 27(1), pages 171-180, March.
  5. Savoia, Antonio & Easaw, Joshy & McKay, Andrew, 2010. "Inequality, Democracy, and Institutions: A Critical Review of Recent Research," World Development, Elsevier, Elsevier, vol. 38(2), pages 142-154, February.
  6. Francisco H. G. Ferreira & Filipe Campante, 2004. "Inefficient lobbying, populism and oligarchy," Textos para discussão, Department of Economics PUC-Rio (Brazil) 483, Department of Economics PUC-Rio (Brazil).
  7. Thaize Challier, M.-Christine, 2010. "Socio-political conflict, social distance, and rent extraction in historical perspective," European Journal of Political Economy, Elsevier, Elsevier, vol. 26(1), pages 51-67, March.
  8. Jennings, Colin, 2009. "The Good, the Bad and the Populist: A Model of Political Agency with Emotional Voters," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2009-30, Scottish Institute for Research in Economics (SIRE).

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