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Oligarchy, Democracy and State Capacity

Author

Listed:
  • Cesar Martinelli

    (CIE, ITAM)

  • Helios Herrera

    (SIPA, Columbia Univeristy)

Abstract

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.

Suggested Citation

  • Cesar Martinelli & Helios Herrera, 2011. "Oligarchy, Democracy and State Capacity," 2011 Meeting Papers 97, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:97
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    Cited by:

    1. is not listed on IDEAS
    2. Johnson, Noel D. & Koyama, Mark, 2017. "States and economic growth: Capacity and constraints," Explorations in Economic History, Elsevier, vol. 64(C), pages 1-20.
    3. Ryan H Murphy, 2024. "Not following the script: When institutional development is uneven," Economic Affairs, Wiley Blackwell, vol. 44(2), pages 338-352, June.
    4. Takashi Kamihigashi, 2014. "Elementary results on solutions to the bellman equation of dynamic programming: existence, uniqueness, and convergence," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 251-273, June.
    5. Takashi Kamihigashi, 2014. "An order-theoretic approach to dynamic programming: an exposition," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(1), pages 13-21, April.
    6. Auerbach, Jan U., 2021. "Political competition over property rights enforcement," European Economic Review, Elsevier, vol. 131(C).
    7. Artem Kochnev, 2021. "Marching to Good Laws: The Impact of War, Politics, and International Credit on Reforms in Ukraine," wiiw Working Papers 192, The Vienna Institute for International Economic Studies, wiiw.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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