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Political Entry, Public Policies, and the Economy

  • Casey B. Mulligan
  • Kevin K. Tsui

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.

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File URL: http://www.nber.org/papers/w13830.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13830.

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Date of creation: Mar 2008
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Handle: RePEc:nbr:nberwo:13830
Note: IO PE POL
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