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Dictators and Oligarchs: A Dynamic Theory of Contested Property Rights

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  • Sergei Guriev

    (New Economic School (NES), Center for Economic and Financial Research (CEFIR), Center for Economic Policy Research (CEPR))

  • Konstantin Sonin

    () (New Economic School (NES), Center for Economic and Financial Research (CEFIR), Center for Economic Policy Research (CEPR))

Abstract

In an economy with weak economic and political institutions, the major institutional choices are made strategically by oligarchs and dictators. The conventional wisdom presumes that as rent-seeking is harmful for oligarchs themselves, institutions such as enforcement of the property rights will emerge eventually. We explicitly model a dynamic game between oligarchs and a dictator, who can contain rent-seeking. The oligarchs choose either a weak dictator (who can be overthrown by an individual oligarch) or a strong dictator (who can only be replaced via a consensus of oligarchs). In equilibrium, no dictator can commit to both: (i) protecting the oligarchs?property rights from the other oligarchs and (ii) not expropriating oligarchs himself. We show that a weak dictator does not limit rent-seeking. A strong dictator does reduce rent-seeking but also expropriates individual oligarchs. We show that even though eliminating rent-seeking is Pareto optimal, weak dictators do get appointed in equilibrium and rent-seeking continues. This outcome is especially likely when economic environment is highly volatile.

Suggested Citation

  • Sergei Guriev & Konstantin Sonin, 2007. "Dictators and Oligarchs: A Dynamic Theory of Contested Property Rights," Working Papers w0116, New Economic School (NES).
  • Handle: RePEc:abo:neswpt:w0116
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    Cited by:

    1. Daron Acemoglu & James A. Robinson, 2013. "Ekonomia kontra polityka: niebezpieczne rady w kwestiach polityki ekonomicznej," Gospodarka Narodowa, Warsaw School of Economics, issue 11-12, pages 113-136.
    2. Kevin Sheedy & Bernardo Guimaraes, 2011. "A model of equilibrium institutions," 2011 Meeting Papers 49, Society for Economic Dynamics.
    3. Daniel Leonard & Ngo Van Long, 2012. "Endogenous Changes in Property Rights Regime," The Economic Record, The Economic Society of Australia, vol. 88(280), pages 79-88, March.
    4. Daron Acemoglu & James A. Robinson, 2013. "Economics versus Politics: Pitfalls of Policy Advice," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 173-192, Spring.
    5. Francisco Pino & Jordi Vidal-Robert, 2014. "Habemus Papam ?Polarization and Conflict in the Papal States," Working Papers ECARES ECARES 2014-27, ULB -- Universite Libre de Bruxelles.
    6. Aram Grigoryan & Mattias Polborn, 2018. "Insecure Property Rights and the Missing Middle," CESifo Working Paper Series 7203, CESifo Group Munich.
    7. Daniel Diermeier & Georgy Egorov & Konstantin Sonin, 2017. "Political Economy of Redistribution," Econometrica, Econometric Society, vol. 85, pages 851-870, May.
    8. Van Long, Ngo, 2013. "The theory of contests: A unified model and review of the literature," European Journal of Political Economy, Elsevier, vol. 32(C), pages 161-181.
    9. Gehlbach, Scott & Keefer, Philip, 2011. "Investment without democracy: Ruling-party institutionalization and credible commitment in autocracies," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 123-139, June.
    10. Michael Rochlitz, 2016. "Political Loyalty Vs Economic Performance: Evidence from Machine Politics in Russia’S Regions," HSE Working papers WP BRP 34/PS/2016, National Research University Higher School of Economics.
    11. Alexander Libman, 2018. "Post-Soviet Trade and Institutional Quality: Subnational Evidence," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 3, pages 115-137.
    12. Li, Yuan & Gilli, Mario, 2014. "Accountability in Autocracies: The Role of Revolution Threat," Stockholm School of Economics Asia Working Paper Series 2014-30, Stockholm School of Economics, Stockholm China Economic Research Institute, revised 06 Mar 2014.
    13. repec:elg:eechap:15325_3 is not listed on IDEAS
    14. Aköz, Kemal Kivanç & Barber IV, Benjamin & Jensen, Jeffrey & Zenker, Christina, 2018. "Revisiting the democracy-private investment nexus: Does inequality matter?," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1215-1233.
    15. Djumashev, Ratbek & Abdullaev, Bekzod, 2017. "Crime, Transition, and Growth," MPRA Paper 80842, University Library of Munich, Germany.

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