IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Why Are Market Economies Politically Stable? A Theory of Capitalist Cohesion

  • Dalgaard, Carl-Johan

    ()

    (University of Copenhagen)

  • Olsson, Ola

    ()

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

The present paper documents that political stability is positively associated with the extent of domestic trade. In explaining this reg- ularity, we provide a model where political cohesion is linked to the emergence of a fully functioning market economy. Without market ex- change, the welfare of inherently selfish individuals will be mutually independent. As a result, political negotiations, echoing the prefer- ences of the citizens of society, will be dog-eat-dog in nature. Whoever has greater bargaining power will be willing to make decisions that en- hance the productivity of his supporters at the expense of other groups in society. If the gains from specialization become sufficiently large, however, a market economy will emerge. From being essentially non- cooperative under self-su¢ ciency, the political decision making process becomes cooperative in the market economy, as the welfare of individ- uals will be mutually interdependent due to the exchange of goods.

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://hdl.handle.net/2077/8481
Download Restriction: no

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 280.

as
in new window

Length: 43 pages
Date of creation: 14 Dec 2007
Date of revision:
Handle: RePEc:hhs:gunwpe:0280
Contact details of provider: Postal:
Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden

Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/

More information through EDIRC

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. Oded Galor & Omer Moav, 2004. "Das Human Kapital: A Theory of the Demise of the Class Structure," GE, Growth, Math methods 0410003, EconWPA.
  2. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," NBER Working Papers 6849, National Bureau of Economic Research, Inc.
  3. Oded Galor & Omer Moav & Dietrich Vollrath, 2005. "Land Inequality and the Emergence of Human Capital Promoting Institutions," Development and Comp Systems 0502018, EconWPA.
  4. Oded Galor & Omer Moav, 2000. "Das Human Kapital," Working Papers 2000-17, Brown University, Department of Economics.
  5. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, March.
  6. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  7. Paul Collier & Anke Hoeffler, 2004. "Greed and Grievance in Civil War," Development and Comp Systems 0409007, EconWPA.
  8. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  9. Olsson, Ola, 2007. "Conflict diamonds," Journal of Development Economics, Elsevier, vol. 82(2), pages 267-286, March.
  10. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  11. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1167-1199.
  12. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
  13. Voth, Hans-Joachim, 1998. "Time and Work in Eighteenth-Century London," The Journal of Economic History, Cambridge University Press, vol. 58(01), pages 29-58, March.
  14. Alberto Alesina & Sule Ozler & Nouriel Roubini & Phillip Swagel, 1992. "Political Instability and Economic Growth," NBER Working Papers 4173, National Bureau of Economic Research, Inc.
  15. Acemoglu,Daron & Robinson,James A., 2006. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521855266, November.
  16. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2007. "Reevaluating the Modernization Hypothesis," CEPR Discussion Papers 6430, C.E.P.R. Discussion Papers.
  17. Easterly, William, 1999. "Life during Growth," Journal of Economic Growth, Springer, vol. 4(3), pages 239-76, September.
  18. de Vries, Jan, 1994. "The Industrial Revolution and the Industrious Revolution," The Journal of Economic History, Cambridge University Press, vol. 54(02), pages 249-270, June.
  19. Gustav Hansson & Ola Olsson, 2006. "Country Size and the Rule of Law: Resuscitating Montesquieu," DEGIT Conference Papers c011_033, DEGIT, Dynamics, Economic Growth, and International Trade.
  20. Dietrich Vollrath & Lennart Erickson, 2007. "Land Distribution and Financial System Development," IMF Working Papers 07/83, International Monetary Fund.
  21. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
  22. Olson, Mancur, 1963. "Rapid Growth as a Destabilizing Force," The Journal of Economic History, Cambridge University Press, vol. 23(04), pages 529-552, December.
  23. Clark, Gregory & Werf, Ysbrand Van Der, 1998. "Work in Progress? The Industrious Revolution," The Journal of Economic History, Cambridge University Press, vol. 58(03), pages 830-843, September.
  24. 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 1275-88, December.
  25. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," Harvard Institute of Economic Research Working Papers 1856, Harvard - Institute of Economic Research.
  26. Michael Kremer, 1993. "Population Growth and Technological Change: One Million B.C. to 1990," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 681-716.
  27. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 725-753, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hhs:gunwpe:0280. 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: (Marie Andersson)

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.