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Political Entry, Public Policies, and the Economy

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  • Casey B. Mulligan
  • Kevin K. Tsui

Abstract

This paper presents a theory of competition for political leadership between incumbent leaders and their challengers in which the possible equilibrium political market structures range from pure monopoly (unchallenged dictatorship) to perfectly competitive (ideal democracy). Leaders are constrained by the threat of "entry" or their ability to tax (or both), so that regimes with no challengers may nonetheless implement policies in the public interest. We offer economic interpretations of why democratic countries are associated with higher wages, why resource abundant countries tend to be nondemocratic, and how technological change affects political development. By focusing on the incentives for political entry, we show how trade sanctions and other policies designed to promote democracy may actually have the unintended consequences of discouraging political competition.

Suggested Citation

  • Casey B. Mulligan & Kevin K. Tsui, 2008. "Political Entry, Public Policies, and the Economy," NBER Working Papers 13830, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13830
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    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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