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Bad Policies Under an Autocrat's Production

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  • Byeongju Jeong

    (CERGE-EI)

Abstract

Bad policies (i.e., policies harmful to private producers such as excessive taxation, arbitrary confiscation, and negligence of pubic goods) are observed in quite a few countries. These countries tend to have autocratic regimes.I explore a reason why bad policies may benefit autocrats.I present a model economy where the autocrat manages his production (e.g., military exploits, plantation cultivation, mining) in addition to setting policies for the private producers. The autocrat has an incentive to repress the income level of private producers: it reduces the wage rate that he must offer to his workers and thereby increases the surplus from his production. Thus the autocrat chooses a tax rate that is higher than the revenue-maximizing rate: it lies on the backward-bending part of the Laffer curve. He may also choose to lower the productivity of private producers through confiscation, neglect of public goods, and other non-tax policies. I argue that the story is helpful in understanding bad policies present in militaristic regimes of the Ottoman and Mughal empires, Trujillo's regime in the plantation- based economy of the Dominican Republic, and Mobutu's regime in mineral- rich Zaire.

Suggested Citation

  • Byeongju Jeong, 2001. "Bad Policies Under an Autocrat's Production," Public Economics 0012002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwppe:0012002
    Note: Type of Document - Acrobat PDF; pages: 20 ; figures: included
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    Cited by:

    1. Grigory V. Kalyagin & Vladimir A. Kozlov, 2012. "Coordination in Political Machinery under Dictatorship: Signals, Shirking and Repression," Working Papers 0001, Moscow State University, Faculty of Economics.
    2. Alper Aslan, 2012. "The Relationship Between Military Spending and Black Market Premium in Greece: An ARDL Approach," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(2), pages 155-161, November.

    More about this item

    Keywords

    Autocracy; Policy; Tax;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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