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Political Instability and Growth in Dictatorships

  • Overland, Jody
  • Simons, Kenneth L
  • Spagat, Michael

We model growth in dictatorships facing each period an endogenous probability of ‘political catastrophe’ that would extinguish the regime's wealth extraction ability. Domestic capital exhibits a bifurcation point determining economic growth or shrinkage. With low initial domestic capital the dictator plunders the country's resources and the economy shrinks. With high initial domestic capital the economy eventually grows faster than is socially optimal.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2653.

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Date of creation: Dec 2000
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Handle: RePEc:cpr:ceprdp:2653
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