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Political Entry, Public Policies, and the Economy

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Author Info
Casey B. Mulligan
Kevin K. Tsui

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Abstract

This paper presents a theory of competition for political leadership between incumbent leaders and their challengers in which the possible equilibrium political market structures range from pure monopoly (unchallenged dictatorship) to perfectly competitive (ideal democracy). Leaders are constrained by the threat of "entry" or their ability to tax (or both), so that regimes with no challengers may nonetheless implement policies in the public interest. We offer economic interpretations of why democratic countries are associated with higher wages, why resource abundant countries tend to be nondemocratic, and how technological change affects political development. By focusing on the incentives for political entry, we show how trade sanctions and other policies designed to promote democracy may actually have the unintended consequences of discouraging political competition.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13830.

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Date of creation: Mar 2008
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Handle: RePEc:nbr:nberwo:13830

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Find related papers by JEL classification:
H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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