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Macro Shocks, Regulatory Quality and Costly Political Action

Author

Listed:
  • Paul Maarek

    () (THEMA, Universite de Cergy-Pontoise and THEMA)

  • Michael Dorsch

    () (The American University of Paris)

  • Karl Dunz

    () (The American University of Paris)

Abstract

We build a theory of political turnover in autocracies where citizens can only express their political preferences to remove the autocrat through costly mass protest. The disenfranchised are imperfectly informed about the autocrat's choice of economic institution. Workers only observe economic outcomes that could result from rent-extracting economic regulations or adverse economic shocks. The disenfranchised have priors about the autocrat's type and, by extension, policy choices. We propose that macro shocks can affect the cost-benefit calculus of costly political action through an informational channel. For an autocrat that has implemented hidden rent-seeking regulation, negative shocks reduce the perceived probability that the autocrat is benevolent, and increase the probability of opposition. We then empirically investigate this idea for a panel of autocratic countries. Using simple linear probability and logit models with fixed effects and using weather variables as instruments for macro shocks, we demonstrate that adverse economic shocks increase the probability of mass protest episodes only in countries with bad regulations.

Suggested Citation

  • Paul Maarek & Michael Dorsch & Karl Dunz, 2012. "Macro Shocks, Regulatory Quality and Costly Political Action," THEMA Working Papers 2012-41, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2012-41
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    File URL: http://thema.u-cergy.fr/IMG/documents/2012-41.pdf
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    References listed on IDEAS

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    Cited by:

    1. Dorsch, Michael T. & Maarek, Paul, 2015. "Inefficient predation and political transitions," European Journal of Political Economy, Elsevier, vol. 37(C), pages 37-48.
    2. Paul Maarek & Michael Dorsch & Karl Dunz, 2012. "Asymmetric Information and Inefficient Regulation of Firms Under the Threat of Revolution," THEMA Working Papers 2012-42, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.

    More about this item

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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