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Autocracies and Development in a Global Economy: A Tale of Two Elites

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  • A. Akerman
  • A. Larsson
  • A. Naghavi

Abstract

This paper studies how comparative advantage and the political elites' endowments shape long-run performance in an economy with imperfect political institutions. In a capital-scarce economy, an autocrat catering to the needs of landowners favours openness to trade at an early stage of development, while an autocrat complying with the preferences of capitalists chooses to shelter the economy from trade. The trade regime interacts with economic institutions, and with policies on capital mobility, to govern capital accumulation. A landed autocrat neglects to improve institutions and blocks foreign capital to maximize extractable rents, leading the economy towards stagnation. By contrast, a capitalist autocrat strengthens institutions, which promotes manufacturing TFP growth, gradually shifts the comparative advantage towards manufacturing and renders the economy attractive to foreign investors. Allowing for trade and foreign capital inflows are thus complementary policies that provide an environment of growth and development in the capital autocracy.

Suggested Citation

  • A. Akerman & A. Larsson & A. Naghavi, 2011. "Autocracies and Development in a Global Economy: A Tale of Two Elites," Working Papers wp775, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp775
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    1. Carter, Michael & Morrow, John, 2014. "The political economy of inclusive rural growth," LSE Research Online Documents on Economics 60268, London School of Economics and Political Science, LSE Library.
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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • P40 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - General
    • P50 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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