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Populist Policies In The Transition To Democracy

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Author Info
Daniel Mejía ()
Carlos Esteban Posada ()

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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 REPÚBLICA in its series BORRADORES DE ECONOMIA with number 003357.

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Length: 38
Date of creation: 31 Aug 2005
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Handle: RePEc:col:000094:003357

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, vol. 83(5), pages 1184-98, December. [Downloadable!] (restricted)
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  2. Campante, Felipe R. & Ferreira, Francisco G.H., 2004. "Inefficient lobbying, populism and oligarchy," Policy Research Working Paper Series 3240, The World Bank. [Downloadable!]
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  3. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Blackwell Publishing, vol. 60(1), pages 35-52, January. [Downloadable!] (restricted)
  4. Bourguignon, Francois & Verdier, Thierry, 2000. "Oligarchy, democracy, inequality and growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 285-313, August. [Downloadable!] (restricted)
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  5. Pedro DalBo & Ernesto DalBo, 2004. "Workers, Warriors and Criminals: Social Conflict in General Equilibrium," Working Papers 2004-11, Brown University, Department of Economics. [Downloadable!]
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  6. Dornbusch, Rudiger & Edwards, Sebastian, 1989. "The macroeconomics of populism in Latin America," Policy Research Working Paper Series 316, The World Bank. [Downloadable!]
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  7. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
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  8. Daron Acemoglu, 2007. "Oligarchic Versus Democratic Societies," Carlo Alberto Notebooks 47, Collegio Carlo Alberto. [Downloadable!]
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  9. Jeffrey D. Sachs, 1989. "Social Conflict and Populist Policies in Latin America," NBER Working Papers 2897, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Daron Acemoglu, 2003. "The Form of Property Rights: Oligarchic vs. Democratic Societies," NBER Working Papers 10037, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Francisco H.G. Ferreira, 2001. "Education for the masses? The interaction between wealth, educational and political inequalities," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(2), pages 533-552, July. [Downloadable!] (restricted)
  12. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
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Cited by:
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  1. Oded Galor, 2009. "Inequality and Economic Development: An Overview," Working Papers 2009-3, Brown University, Department of Economics. [Downloadable!]
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