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Oligarchy, Democracy and State Capacity

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  • Cesar Martinelli

    (CIE, ITAM)

  • Helios Herrera

    (SIPA, Columbia Univeristy)

Abstract

We develop a dynamic political economy model in which invest- ment in the state capacity to levy taxes and deter crime is a policy variable, and we study the evolution of state capacity when policy is chosen by an elite. We show that democratization in the sense of ex- pansion of the elite leads to an increased investment in state capacity and to a reduction in illegal activities, and has non-monotonic effects on tax rates as it reduces the willingness of the elite to engage in particularistic spending but enhances its willingness to provide public goods. Depending on initial conditions, consensual political changes may lead either to democratization or to the entrenchment of an im- movable elite.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 97.

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Date of creation: 2011
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Handle: RePEc:red:sed011:97

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Web page: http://www.EconomicDynamics.org/society.htm
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  1. Acemoglu, Daron & Robinson, James A, 1998. "Why did the West Extend the Franchise? Democracy, Inequality and Growth in Historical Perspective," CEPR Discussion Papers 1797, C.E.P.R. Discussion Papers.
  2. Besley, Timothy J. & Persson, Torsten, 2009. "State Capacity, Conflict and Development," CEPR Discussion Papers 7336, C.E.P.R. Discussion Papers.
  3. Timothy Besley & Torsten Persson, 2007. "The Origins of State Capacity: Property Rights, Taxation, and Politics," NBER Working Papers 13028, National Bureau of Economic Research, Inc.
  4. Arghya Ghosh & Peter Robertson, 2012. "Trade and expropriation," Economic Theory, Springer, vol. 50(1), pages 169-191, May.
  5. Daron Agemoglu & Davide Ticchi & Andrea Vindigni, 2006. "Emergence and Persistence of Inefficient States," LABORatorio R. Revelli Working Papers Series 54, LABORatorio R. Revelli, Centre for Employment Studies.
  6. Acemoglu,Daron & Robinson,James A., 2006. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521855266, November.
  7. Daron Acemoglu, 2005. "Politics and Economics in Weak and Strong States," NBER Working Papers 11275, National Bureau of Economic Research, Inc.
  8. Daron Acemoglu & James A. Robinson, 2006. "Persistence of Power, Elites and Institutions," NBER Working Papers 12108, National Bureau of Economic Research, Inc.
  9. Alessandro Lizzeri & Nicola Persico, 2004. "Why Did the Elites Extend the Suffrage? Democracy and the Scope of Government, With an Application to Britain's "Age of Reform"," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 705-763, May.
  10. Ling Shen, 2007. "When will a Dictator be Good?," Economic Theory, Springer, vol. 31(2), pages 343-366, May.
  11. Erwan Quintin, 2008. "Contract enforcement and the size of the informal economy," Economic Theory, Springer, vol. 37(3), pages 395-416, December.
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Cited by:
  1. Takashi Kamihigashi, 2012. "Elementary Results on Solutions to the Bellman Equation of Dynamic Programming: Existence, Uniqueness, and Convergence," Discussion Paper Series DP2012-31, Research Institute for Economics & Business Administration, Kobe University.
  2. Takashi Kamihigashi, 2013. "An Order-Theoretic Approach to Dynamic Programming: An Exposition," Discussion Paper Series DP2013-29, Research Institute for Economics & Business Administration, Kobe University, revised Nov 2013.

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