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Public Sector Capital and the Transition from Dictatorship to Democracy

  • Christopher J. Ellis
  • John Fender

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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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
Handle: RePEc:bir:birmec:07-14
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Web page: http://www.economics.bham.ac.uk

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