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Public Sector Capital and the Transition from Dictatorship to Democracy

  • Christopher J. Ellis
  • John Fender
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    A model where a dictator decides on both the level of public-sector capital and whether to democratize is constructed. Under dictatorship the labor market is monopsonistic; democratization involves instituting a competitive labor market. Workers sometimes have a credible threat of revolution and this may affect the dictator’s investment decision; it may also induce democratization. The possibility of a “political development trap”, where the dictator stifles development to stay in power, emerges. The model is used, inter alia, to explain the effects of the 1832 Reform Act in the UK and the worldwide positive correlation between income and democracy.

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    File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/Paper14.pdf
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    Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 07-14.

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    Length: 41 pages
    Date of creation: Aug 2007
    Date of revision:
    Handle: RePEc:bir:birmec:07-14
    Contact details of provider: Postal: Edgbaston, Birmingham, B15 2TT
    Web page: http://www.economics.bham.ac.uk

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    1. Demetriades, Panicos O & Mamuneas, Theofanis P, 2000. "Intertemporal Output and Employment Effects of Public Infrastructure Capital: Evidence from 12 OECD Economics," Economic Journal, Royal Economic Society, vol. 110(465), pages 687-712, July.
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    3. James A. Robinson, 1999. "When is a State Predatory?," CESifo Working Paper Series 178, CESifo Group Munich.
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    6. Jody Overland & Kenneth L. Simons & Michael Spagat, 2000. "Political Instability and Growth in Dictatorships," William Davidson Institute Working Papers Series 354, William Davidson Institute at the University of Michigan.
    7. Torsten Persson & Guido Tabellini, 2006. "Democratic Capital: The Nexus of Political and Economic Change," NBER Working Papers 12175, National Bureau of Economic Research, Inc.
    8. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005. "Income and Democracy," CEPR Discussion Papers 5273, C.E.P.R. Discussion Papers.
    9. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
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    11. 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.
    12. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S158-S183, December.
    13. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
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    15. repec:cup:cbooks:9780521583299 is not listed on IDEAS
    16. 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.
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    20. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
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