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Political labor market, government policy, and stability of a non-democratic regime

  • Lazarev, Valery

An important source of stability of a hierarchical non-democratic political regime, such as that of the Soviet Union in the past or China today, is the rulers’ ability to buy the services and political support of activists recruited from the working population in the monopsonistic political labor market. Implicit contracts that underlie this exchange require retirement of incumbents to allow for deferred promotion of activists into rent-paying positions. An analysis of optimal promotion contracts shows that regime stability is consistent with a high income gap between the rulers and the working population, strengthened when government pursues an active investment policy, and not affected positively by government spending on public goods. Predictions of the promotion contract model are tested using Soviet data for the period 1956 to 1968.

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File URL: http://mpra.ub.uni-muenchen.de/2352/1/MPRA_paper_2352.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2352.

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Date of creation: 16 Mar 2007
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Handle: RePEc:pra:mprapa:2352
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  1. Jody Overland & Kenneth L. Simons & Michael Spagat, 2000. "Political Instability and Growth in Dictatorships," William Davidson Institute Working Papers Series 354, William Davidson Institute at the University of Michigan.
  2. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  3. Adi Schnytzer & Janez Šušteršič, 1998. "Why join the party in a one-party system?: Popularity versus political exchange," Public Choice, Springer, vol. 94(1), pages 117-134, January.
  4. Martin C. McGuire & Mancur Olson Jr., 1996. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 72-96, March.
  5. Georgy Egorov & Konstantin Sonin, 2011. "Dictators And Their Viziers: Endogenizing The Loyalty–Competence Trade‐Off," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 903-930, October.
  6. Grossman, Herschel I. & Noh, Suk Jae, 1994. "Proprietary public finance and economic welfare," Journal of Public Economics, Elsevier, vol. 53(2), pages 187-204, February.
  7. repec:cup:cbooks:9780521583299 is not listed on IDEAS
  8. Lazarev, Valery & Gregory, Paul, 2003. "Commissars and cars: A case study in the political economy of dictatorship," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 1-19, March.
  9. Barro, Robert J., 1999. "Determinants of Democracy," Scholarly Articles 3451297, Harvard University Department of Economics.
  10. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  11. Bertocchi, Graziella & Spagat, Michael, 1999. "The Politics of Cooptation," CEPR Discussion Papers 2156, C.E.P.R. Discussion Papers.
  12. Eugenia Belova & Valery Lazarev, 2007. "Why party and how much? The Soviet State and the party finance," Public Choice, Springer, vol. 130(3), pages 437-456, March.
  13. Dimitriy Gershenson & Herschel I. Grossman, 1999. "Cooption and Repression in the Soviet Union," Working Papers 99-25, Brown University, Department of Economics.
  14. Easterly, William & Fischer, Stanley, 1995. "The Soviet Economic Decline," World Bank Economic Review, World Bank Group, vol. 9(3), pages 341-71, September.
  15. repec:cup:cbooks:9780521794497 is not listed on IDEAS
  16. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
  17. Schnytzer, Adi & Sustersic, Janez, 1998. " Why Join the Party in a One-Party System?: Popularity versus Political Exchange," Public Choice, Springer, vol. 94(1-2), pages 117-34, January.
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