IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

A Model of Equilibrium Institutions

  • Bernardo Guimaraes
  • Kevin D. Sheedy

Institutions that serve the interests of an elite are often cited as an important reason for poor economic performance. This paper builds a model of institutions that allocate resources and power to maximize the payoff of an elite, but where any group that exerts sufficient fighting effort can launch a rebellion that destroys the existing institutions. The rebels are then able to establish new institutions as a new elite, which will similarly face threats of rebellion. The paper analyses the economic consequences of the institutions that emerge as the equilibrium of this struggle for power. High levels of economic activity depend on protecting private property from expropriation, but the model predicts this can only be achieved if power is not as concentrated as the elite would like it to be, ex post. Power sharing endogenously enables the elite to act as a government committed to property rights, which would otherwise be time inconsistent. But sharing power entails sharing rents, so in equilibrium power is too concentrated, leading to inefficiently low investment.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://cep.lse.ac.uk/pubs/download/dp1123.pdf
Download Restriction: no

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1123.

as
in new window

Length:
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:cep:cepdps:dp1123
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Myerson, Roger B., 2010. "Capitalist investment and political liberalization," Theoretical Economics, Econometric Society, vol. 5(1), January.
  2. Daron Acemoglu, 2002. "Why Not a Political Coase Theorem? Social Conflict, Commitment and Politics," NBER Working Papers 9377, National Bureau of Economic Research, Inc.
  3. Timothy Besley & Torsten Persson, 2009. "State capacity, conflict and development," LSE Research Online Documents on Economics 25426, London School of Economics and Political Science, LSE Library.
  4. Ulrike Malmendier, 2009. "Law and Finance "at the Origin"," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 1076-1108, December.
  5. Edward L. Glaeser & Andrei Shleifer, 2002. "The Injustice of Inequality," NBER Working Papers 9150, National Bureau of Economic Research, Inc.
  6. Timothy Besley & Torsten Persson, 2009. "The Origins of State Capacity: Property Rights, Taxation, and Politics," American Economic Review, American Economic Association, vol. 99(4), pages 1218-44, September.
  7. Guriev, Sergei & Sonin, Konstantin, 2009. "Dictators and oligarchs: A dynamic theory of contested property rights," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 1-13, February.
  8. Daron Acemoglu, 2008. "Oligarchic Versus Democratic Societies," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 1-44, 03.
  9. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
  10. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
  11. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2008. "Coalition Formation in Non-Democracies," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 987-1009.
  12. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, number 9780199207954, March.
  13. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
  14. Catherine Hafer, 2006. "On the Origins of Property Rights: Conflict and Productionin the State of Nature," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 119-143.
  15. Daron Acemoglu & Simon Johnson, 2003. "Unbundling Institutions," NBER Working Papers 9934, National Bureau of Economic Research, Inc.
  16. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  17. Timothy Besley & Torsten Persson, 2009. "Repression or civil war?," LSE Research Online Documents on Economics 33748, London School of Economics and Political Science, LSE Library.
  18. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  19. Levy, Gilat, 2004. "A model of political parties," Journal of Economic Theory, Elsevier, vol. 115(2), pages 250-277, April.
  20. Acemoglu, Daron & Robinson, James A, 2006. "Persistence of Power, Elites and Institutions," CEPR Discussion Papers 5603, C.E.P.R. Discussion Papers.
  21. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  22. Razin, Ronny & Piccione, Michele, 2009. "Coalition formation under power relations," Theoretical Economics, Econometric Society, vol. 4(1), March.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Economic Logic blog

When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp1123. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.