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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. Acemoglu, Daron & Robinson, James A, 2002. "Economic Backwardness in Political Perspective," CEPR Discussion Papers 3261, C.E.P.R. Discussion Papers.
    2. 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.
    3. Humberto Llavador & Robert J. Oxoby, 2004. "Partisan Competition, Growth and the Franchise," Working Papers 109, Barcelona Graduate School of Economics.
    4. Barro, Robert J., 1999. "Determinants of Democracy," Scholarly Articles 3451297, Harvard University Department of Economics.
    5. Feinstein, Charles H., 1998. "Pessimism Perpetuated: Real Wages and the Standard of Living in Britain during and after the Industrial Revolution," The Journal of Economic History, Cambridge University Press, vol. 58(03), pages 625-658, September.
    6. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
    7. Torsten Persson & Guido Tabellini, 2006. "Democratic capital: The nexus of political and economic change," Working Papers 308, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    8. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
    9. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
    10. Rodrik, Dani, 1998. "Democracies Pay Higher Wages," CEPR Discussion Papers 1776, C.E.P.R. Discussion Papers.
    11. 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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    13. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
    14. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
    15. 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.
    16. 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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    18. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1999. " The Incidence of Overdissipation in Rent-Seeking Contests," Public Choice, Springer, vol. 99(3-4), pages 439-54, June.
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    20. James A. Robinson, 1999. "When is a State Predatory?," CESifo Working Paper Series 178, CESifo Group Munich.
    21. repec:dgr:uvatin:19970045 is not listed on IDEAS
    22. 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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