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Political Alternation as a Restraint on Investing in Influence: Evidence from the Post-Communist Transition

  • Milanovic, Branko
  • Hoff, Karla
  • Horowitz, Shale

We develop and implement a method for measuring the frequency of changes in power among distinct leaders and ideologically distinct parties that is comparable across political systems. We find that more frequent alternation in power is associated with the emergence of better governance in postcommunist countries. The results are consistent with the hypothesis that firms seek durable protection from the state, which implies that expected political alternation is relevant to the decision whether to invest in influence with the governing party or, alternatively, to demand institutions that apply predictable rules, with equality of treatment, regardless of the party in power.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11829.

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Date of creation: 30 Aug 2008
Date of revision:
Handle: RePEc:pra:mprapa:11829
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  1. Murshed, S. Mansoob, 2004. "When Does Natural Resource Abundance Lead to a Resource Curse?," Discussion Papers 24137, International Institute for Environment and Development, Environmental Economics Programme.
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  8. Landes, William M & Posner, Richard A, 1975. "The Independent Judiciary in an Interest-Group Perspective," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 875-901, December.
  9. Besley, Timothy J. & Burgess, Robin, 2001. "The Political Economy of Government Responsiveness: Theory and Evidence from India," CEPR Discussion Papers 2721, C.E.P.R. Discussion Papers.
  10. Avinash Dixit & Gene M. Grossman & Faruk Gul, 2000. "The Dynamics of Political Compromise," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 531-568, June.
  11. Robert H. Bates, 2004. "On The Politics of Property Rights by Haber, Razo, and Maurer," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 494-500, June.
  12. Karla Hoff & Joseph E. Stiglitz, 2002. "After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," NBER Working Papers 9282, National Bureau of Economic Research, Inc.
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