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Financial Integration in Autocracies: Greasing the Wheel or More to Steal?

Author

Listed:
  • Ramin Dadasov
  • Philipp Harms

    (University of Mainz)

  • Oliver Lorz

    (lorz@rwth-aachen.de)

Abstract

This paper analyzes the influence of financial integration on institutional quality. We construct a dynamic political-economic model of an autocracy in which a ruling elite uses its political power to expropriate the general population. Although financial integration reduces capital costs for entrepreneurs and thereby raises gross incomes in the private sector, the elite may counteract this effect by increasing the level of expropriation. Since de facto political power is linked to economic resources, financial integration also has long-run consequences for the distribution of power and for the rise of an entrepreneurial class.

Suggested Citation

  • Ramin Dadasov & Philipp Harms & Oliver Lorz, 2010. "Financial Integration in Autocracies: Greasing the Wheel or More to Steal?," MAGKS Papers on Economics 201014, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201014
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    Cited by:

    1. Markus Alzer & Ramin Dadasov, 2013. "Financial Liberalization and Institutional Development," Economics and Politics, Wiley Blackwell, vol. 25(3), pages 424-452, November.

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    More about this item

    Keywords

    Institutions; Capital Mobility; Political Economy;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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