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Political Rents, Promotion Incentives, and Support for a Non-Democratic Regime

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  • Valery Lazarev

Abstract

This paper analyzes the economic foundations of a non-democratic political regime, where the ruling bureaucracy captures rents through collective control over state property and job assignment. The model developed here yields the equilibrium in the "political labor market," where the ruling bureaucracy buys services and political support of activists recruited from the working population. The underlying implicit contract requires that the incumbent bureaucrats retire after a certain time to allow for deferred promotion of activists into rent-paying positions. The major implications are that the stability of a non-democratic regime is consistent with high-income gap between the rulers and the rest of the population, strengthened when government pursues an active investment policy, and is not directly affected by public goods provision or the rate of economic growth. The results of econometric analysis of panel data from former Soviet states for the period of 1956-1968 confirm the predictions of the model.

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Bibliographic Info

Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 882.

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Length: 52 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:egc:wpaper:882

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Keywords: non-democratic regimes; bureaucracy; hierarchy; political support; promotion incentives; implicit contract; Soviet Union;

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  1. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  2. Schnytzer, Adi & Sustersic, Janez, 1998. " Why Join the Party in a One-Party System?: Popularity versus Political Exchange," Public Choice, Springer, vol. 94(1-2), pages 117-34, January.
  3. Acemoglu, Daron & Robinson, James A, 1999. "A Theory of Political Transitions," CEPR Discussion Papers 2277, C.E.P.R. Discussion Papers.
  4. Dmitriy Gershenson & Herschel I. Grossman, 2001. "Cooption and Repression in the Soviet Union," Economics and Politics, Wiley Blackwell, vol. 13(1), pages 31-47, 03.
  5. Barro, Robert J., 1999. "Determinants of Democracy," Scholarly Articles 3451297, Harvard University Department of Economics.
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  8. Wintrobe,Ronald, 2000. "The Political Economy of Dictatorship," Cambridge Books, Cambridge University Press, number 9780521794497, April.
  9. Brennan,Geoffrey & Buchanan,James M., 1980. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521233293, April.
  10. Easterly, William & Fischer, Stanley, 1995. "The Soviet Economic Decline," World Bank Economic Review, World Bank Group, vol. 9(3), pages 341-71, September.
  11. Mark Harrison, 2002. "Coercion, compliance, and the collapse of the Soviet command economy," Economic History Review, Economic History Society, vol. 55(3), pages 397-433, 08.
  12. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
  13. I. Valsecchi, 1996. "Job Assignment and Promotion," Departmental Working Papers 1996-07, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  14. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  15. 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.
  16. Yuhn, Ky-hyang, 1991. "Economic Growth, Technical Change Biases, and the Elasticity of Substitution: A Test of the De La Grandville Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 340-46, May.
  17. 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.
  18. Adi Schnytzer & Janez Šušteršič, 1998. "Why join the party in a one-party system?: Popularity versus political exchange," Public Choice, Springer, vol. 94(1), pages 117-134, January.
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