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Oligarchy, Democracy and State Capacity

  • Cesar Martinelli

    (CIE, ITAM)

  • Helios Herrera

    (SIPA, Columbia Univeristy)

We develop a dynamic political economy model in which invest- ment in the state capacity to levy taxes and deter crime is a policy variable, and we study the evolution of state capacity when policy is chosen by an elite. We show that democratization in the sense of ex- pansion of the elite leads to an increased investment in state capacity and to a reduction in illegal activities, and has non-monotonic effects on tax rates as it reduces the willingness of the elite to engage in particularistic spending but enhances its willingness to provide public goods. Depending on initial conditions, consensual political changes may lead either to democratization or to the entrenchment of an im- movable elite.

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File URL: https://www.economicdynamics.org/meetpapers/2011/paper_97.pdf
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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 97.

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Date of creation: 2011
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Handle: RePEc:red:sed011:97
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Timothy J. Besley & Torsten Persson, 2009. "State Capacity, Conflict and Development," NBER Working Papers 15088, National Bureau of Economic Research, Inc.
  2. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, 1.
  3. Arghya Ghosh & Peter Robertson, 2012. "Trade and expropriation," Economic Theory, Springer, vol. 50(1), pages 169-191, May.
  4. Daron Acemoglu & James A. Robinson, 2006. "Persistence of Power, Elites and Institutions," NBER Working Papers 12108, National Bureau of Economic Research, Inc.
  5. Erwan Quintin, 2008. "Contract enforcement and the size of the informal economy," Economic Theory, Springer, vol. 37(3), pages 395-416, December.
  6. Besley, Timothy J. & Persson, Torsten, 2007. "The Origins of State Capacity: Property Rights, Taxation, and Politics," CEPR Discussion Papers 6370, C.E.P.R. Discussion Papers.
  7. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1167-1199.
  8. Daron Acemoglu & Davide Ticchi & Andrea Vindigni, 2007. "Emergence and Persistence of Inefficient States," Working Papers 0707, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2007.
  9. Daron Acemoglu, 2005. "Politics and Economics in Weak and Strong States," NBER Working Papers 11275, National Bureau of Economic Research, Inc.
  10. Ling Shen, 2007. "When will a Dictator be Good?," Economic Theory, Springer, vol. 31(2), pages 343-366, May.
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