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Why are Rich Countries more Politically Cohesive?

Author

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  • Carl-Johan Dalgaard

    (Department of Economics, University of Copenhagen)

  • Ola Olsson

    (University of Gothenburg)

Abstract

We document empirically that rich countries are more politically cohesive than poorer countries. In order to explain this regularity, we provide a model where political cohesion is linked to the emergence of a fully functioning market economy. Without market exchange, the welfare of inherently selfish individuals will be mutually independent. As a result, political negotiations, echoing the preferences of the citizens of society, will be dog-eat-dog in nature. Whoever has greater bargaining power will be willing to make decisions that enhance 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-cohesive under self-sufficiency, the political decision making process becomes cohesive in the market economy, as the welfare of individuals will be mutually interdependent due to the exchange of goods. We refer to this latter state as “capitalist cohesion”.

Suggested Citation

  • Carl-Johan Dalgaard & Ola Olsson, 2009. "Why are Rich Countries more Politically Cohesive?," Discussion Papers 09-23, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:0923
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    Cited by:

    1. Ola Olsson, 2016. "Climate Change and Market Collapse: A Model Applied to Darfur," Games, MDPI, Open Access Journal, vol. 7(1), pages 1-27, March.
    2. repec:gam:jgames:v:7:y:2016:i:1:p:9:d:66071 is not listed on IDEAS
    3. Beugelsdijk, Sjoerd & Klasing, Mariko & Milionis, Petros, 2016. "Value Diversity and Regional Economic Development," GGDC Research Memorandum GD-163, Groningen Growth and Development Centre, University of Groningen.

    More about this item

    Keywords

    political cohesion; economic growth;

    JEL classification:

    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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