IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

A Model of Equilibrium Institutions

Author Info

Listed author(s):
  • Guimarães, Bernardo
  • Sheedy, Kevin D.

Abstract

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.

Download Info

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://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8855
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8855.

as
in new window

Length:
Date of creation: Feb 2012
Handle: RePEc:cpr:ceprdp:8855
Contact details of provider: Postal:
Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.

Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


Keywords: institutions; political economy; power struggle; property rights; time inconsistency;

Other versions of this item:

Find related papers by JEL classification:
  • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
  • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
  • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

This paper has been announced in the following NEP Reports:

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. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  2. Ulrike Malmendier, 2009. "Law and Finance "at the Origin"," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 1076-1108, December.
  3. Grossman, Herschel I., 2002. ""Make us a king": anarchy, predation, and the state," European Journal of Political Economy, Elsevier, vol. 18(1), pages 31-46, March.
  4. Levy, Gilat, 2004. "A model of political parties," Journal of Economic Theory, Elsevier, vol. 115(2), pages 250-277, April.
  5. 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.
  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 1218-1244, September.
  7. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, number 9780199207954.
  8. Timothy Besley & Torsten Persson, 2009. "Repression or Civil War?," American Economic Review, American Economic Association, vol. 99(2), pages 292-297, May.
  9. Timothy Besley & Torsten Persson, 2010. "State Capacity, Conflict, and Development," Econometrica, Econometric Society, vol. 78(1), pages 1-34, 01.
  10. Daron Acemoglu, 2008. "Oligarchic Versus Democratic Societies," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 1-44, 03.
  11. Myerson, Roger B., 2010. "Capitalist investment and political liberalization," Theoretical Economics, Econometric Society, vol. 5(1), January.
  12. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.
  13. 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.
  14. repec:hrv:faseco:30747194 is not listed on IDEAS
  15. Daron Acemoglu & James A. Robinson, 2008. "Persistence of Power, Elites, and Institutions," American Economic Review, American Economic Association, vol. 98(1), pages 267-293, March.
  16. 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 1275-1288, December.
  17. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
  18. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
  19. 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.
  20. Glaeser, Edward & Scheinkman, Jose & Shleifer, Andrei, 2003. "The injustice of inequality," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 199-222, January.
  21. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135-135.
  22. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
  23. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422.
  24. 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)

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. How thieving elites can prevent rebellions
    by Economic Logician in Economic Logic on 2012-03-01 15:57:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as
in new window


Cited by:

  1. Leonardo Becchetti & Riccardo Massari & Paolo Naticchioni, 2014. "The drivers of happiness inequality: suggestions for promoting social cohesion," Oxford Economic Papers, Oxford University Press, vol. 66(2), pages 419-442.
  2. Yang, Jidong & Liu, Kai & Zhang, Yiran, 2015. "Happiness Inequality in China," MPRA Paper 66623, University Library of Munich, Germany.
  3. Campante, Filipe R. & Do, Quoc-Anh & Guimaraes, Bernardo, 2012. "Isolated Capital Cities and Misgovernance: Theory and Evidence," Working Paper Series rwp12-058, Harvard University, John F. Kennedy School of Government.
  4. Tim Willems & Shaun Larcom & Mare Sarr, 2013. "What shall we do with the bad dictator?," Economics Series Working Papers 671, University of Oxford, Department of Economics.
  5. Leonardo Becchetti & Riccardo Massari & Paolo Naticchioni, 2010. "Why has happiness inequality increased? Suggestions for promoting social cohesion," Working Papers 177, ECINEQ, Society for the Study of Economic Inequality.

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

  1. Economic Logic blog

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8855. 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.