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Political Rents, Promotion Incentives, and Support for a Non-Democratic Regime

  • Valery Lazarev

This paper analyzes the economic foundations of a non-democratic political regime, where the ruling bureaucracy captures rents through collective control over state property and job assignment. The model developed here yields the equilibrium in the "political labor market," where the ruling bureaucracy buys services and political support of activists recruited from the working population. The underlying implicit contract requires that the incumbent bureaucrats retire after a certain time to allow for deferred promotion of activists into rent-paying positions. The major implications are that the stability of a non-democratic regime is consistent with high-income gap between the rulers and the rest of the population, strengthened when government pursues an active investment policy, and is not directly affected by public goods provision or the rate of economic growth. The results of econometric analysis of panel data from former Soviet states for the period of 1956-1968 confirm the predictions of the model.

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File URL: http://www.econ.yale.edu/growth_pdf/cdp882.pdf
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Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 882.

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Length: 52 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:egc:wpaper:882
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  1. Schnytzer, Adi & Sustersic, Janez, 1998. " Why Join the Party in a One-Party System?: Popularity versus Political Exchange," Public Choice, Springer, vol. 94(1-2), pages 117-34, January.
  2. repec:cup:cbooks:9780521583299 is not listed on IDEAS
  3. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
  4. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  5. Harrison, Mark, 2001. "Coercion, compliance and the collapse of the soviet command economy," The Warwick Economics Research Paper Series (TWERPS) 602, University of Warwick, Department of Economics.
  6. repec:cup:cbooks:9780521794497 is not listed on IDEAS
  7. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  8. Moselle, Boaz & Polak, Benjamin, 2001. "A Model of a Predatory State," Journal of Law, Economics and Organization, Oxford University Press, vol. 17(1), pages 1-33, April.
  9. Yuhn, Ky-hyang, 1991. "Economic Growth, Technical Change Biases, and the Elasticity of Substitution: A Test of the De La Grandville Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 340-46, May.
  10. Easterly, William & Fischer, Stanley, 1995. "The Soviet Economic Decline," World Bank Economic Review, World Bank Group, vol. 9(3), pages 341-71, September.
  11. repec:cup:cbooks:9780521233293 is not listed on IDEAS
  12. 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.
  13. Grossman, Herschel I. & Noh, Suk Jae, 1994. "Proprietary public finance and economic welfare," Journal of Public Economics, Elsevier, vol. 53(2), pages 187-204, February.
  14. repec:cup:cbooks:9780521027922 is not listed on IDEAS
  15. Dmitriy Gershenson & Herschel I. Grossman, 2001. "Cooption and Repression in the Soviet Union," Economics and Politics, Wiley Blackwell, vol. 13(1), pages 31-47, 03.
  16. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
  17. 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.
  18. Valsecchi, Irene, 2000. " Job Assignment and Promotion," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 31-51, February.
  19. Barro, Robert J., 1999. "Determinants of Democracy," Scholarly Articles 3451297, Harvard University Department of Economics.
  20. Adi Schnytzer & Janez Šušteršič, 1998. "Why join the party in a one-party system?: Popularity versus political exchange," Public Choice, Springer, vol. 94(1), pages 117-134, January.
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