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Bi-communalism and the economic origins of democracy: a case study

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  • Khemraj, Tarron

Abstract

The paper shows how democratic elections in a bi-communal society with entrenched ethnic voting results in an elected oligarchy in which elites of one ethnic group control the allocation of scarce economic resources. Using a simple strategic game, the paper shows that the control of resources results in the Nash equilibrium of uneven development. Heterogeneous agents are included in the model, which is solved for the conditions under which democratic consolidation might occur. Token resource transfers from elites to other groups will tend not to guarantee consolidation. Remittances to the masses tend to prevent democratic consolidation, while bi-lateral grants to an elite dominated government prevent consolidation under some restricted conditions. Constitutional institutions might be necessary to incentivize explicit cooperation – the anti-Nash equilibrium.

Suggested Citation

  • Khemraj, Tarron, 2013. "Bi-communalism and the economic origins of democracy: a case study," MPRA Paper 47288, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:47288
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    File URL: https://mpra.ub.uni-muenchen.de/47288/1/MPRA_paper_47288.pdf
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    References listed on IDEAS

    as
    1. Daron Acemoglu, 2008. "Oligarchic Versus Democratic Societies," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 1-44, March.
    2. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    3. Butkiewicz, James L. & Yanikkaya, Halit, 2006. "Institutional quality and economic growth: Maintenance of the rule of law or democratic institutions, or both?," Economic Modelling, Elsevier, vol. 23(4), pages 648-661, July.
    4. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    5. Boakye, Said, 2012. "Theory of social transformation, political transition and economic growth," Economic Systems, Elsevier, vol. 36(3), pages 411-425.
    6. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, March.
    7. Jean-Michel Josselin & Alain Marciano, 2002. "Freedom of speech in a constitutional political economy perspective," Post-Print halshs-00069680, HAL.
    8. A. P. Thirlwall, 2007. "The least developed countries report, 2006: Developing productive capacities," Journal of Development Studies, Taylor & Francis Journals, vol. 43(4), pages 766-778.
    9. Paul Collier, 2000. "Ethnicity, Politics and Economic Performance," Economics and Politics, Wiley Blackwell, vol. 12(3), pages 225-245, November.
    10. Khemraj, Tarron, 2007. "The missing link: the finance-growth nexus and the Guyanese growth stagnation," MPRA Paper 16342, University Library of Munich, Germany.
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    More about this item

    Keywords

    fractionalization; political economy; prisoner’s dilemma; bi-communalism; institutions;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P0 - Economic Systems - - General

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