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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.
    2. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
    3. Jody Overland, Kenneth Simons and Michael Spagat, 2003. "Political Instability and Growth in Dictatorships," Royal Holloway, University of London: Discussion Papers in Economics 03/11, Department of Economics, Royal Holloway University of London, revised Dec 2003.
    4. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
    5. Barro, Robert J., 1999. "Determinants of Democracy," Scholarly Articles 3451297, Harvard University Department of Economics.
    6. Humberto Llavador & Robert Oxoby, 2003. "Partisan competition, growth and the franchise," Economics Working Papers 730, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2004.
    7. repec:cup:cbooks:9780521583299 is not listed on IDEAS
    8. Alessandro Lizzeri & Nicola Persico, 2004. "Why Did the Elites Extend the Suffrage? Democracy and the Scope of Government, With an Application to Britain's "Age of Reform"," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 705-763, May.
    9. Dani Rodrik, 1998. "Democracies Pay Higher Wages," NBER Working Papers 6364, National Bureau of Economic Research, Inc.
    10. James A. Robinson, 1999. "When is a State Predatory?," CESifo Working Paper Series 178, CESifo Group Munich.
    11. Torsten Persson & Guido Tabellini, 2006. "Democratic Capital: The Nexus of Political and Economic Change," NBER Working Papers 12175, National Bureau of Economic Research, Inc.
    12. 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.
    13. Acemoglu, Daron & Robinson, James A, 2002. "Economic Backwardness in Political Perspective," CEPR Discussion Papers 3261, C.E.P.R. Discussion Papers.
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    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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    18. Acemoglu, Daron & Robinson, James A, 1998. "Why did the West Extend the Franchise? Democracy, Inequality and Growth in Historical Perspective," CEPR Discussion Papers 1797, C.E.P.R. Discussion Papers.
    19. 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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    21. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
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