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The Dictator and the Parties A Study on Policy Co-operation in Mineral Economies

Author

Listed:
  • Pablo Astorga

    (Oxford University)

Abstract

This paper develops a game to study the possibility of co-operative behaviour in a situation where the political system is dominated by two strong, opportunistic parties competing in an economy highly dependent on the export of a commodity. Since a binding agreement as an external solution is unlikely to succeed due to the close association between the incumbent party and the government (the guardian), the paper explores the extent to which co-operation between political parties that alternate in office can rely on self-enforcing strategies to provide an internal solution. For appropriate values of the probability of re-election and the discount factor, it is possible to rely on reciprocity to sustain an early-stopping equilibrium. However, cooperation is undermined by low values of re-election probability out of current revenues and party myopia. In those circumstances, the self-policing solution might not be viable and an institutional response would be necessary. The game also sheds some light on the apparent paradox of situations in some mineral- rich democracies (such as the recent Venezuelan experience) where the enjoyment of considerable external revenues is followed by a period of economic stagnation, a deterioration of political stability, and the surge of a dictatorship threat.

Suggested Citation

  • Pablo Astorga, 2001. "The Dictator and the Parties A Study on Policy Co-operation in Mineral Economies," Development Working Papers 157, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:157
    as

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    File URL: http://www.dagliano.unimi.it/media/WP2001_157.pdf
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    References listed on IDEAS

    as
    1. Dutta Prajit K. & Sundaram Rangarajan K., 1993. "How Different Can Strategic Models Be?," Journal of Economic Theory, Elsevier, vol. 60(1), pages 42-61, June.
    2. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
    3. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    4. Warwick J. McKibbin & Nouriel Roubini & Jeffrey Sachs, 1987. "Dynamic Optimization in Two-Party Models," NBER Working Papers 2213, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Political Economy; Non-cooperative games; Democracy; Mineral Economies; Venezuela;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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