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Pampered Bureaucracy, Political Stability, and Trade Integration

Author

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  • Caleb Stroup

    () (Department of Economics, Vanderbilt University)

  • Benjamin Zissimos

    () (Department of Economics, Vanderbilt University)

Abstract

This paper shows how, under threat of revolution, a nation's elite are able to maintain political stability and hence ownership of their wealth by creating or expanding a `pampered bureaucracy.' The elite thus divert part of an otherwise entrepreneurial middle class from more productive manufacturing activities, reducing economic efficiency. If the country has a comparative advantage in primary products, trade integration is potentially destabilizing since it raises the payoff to the lower classes of mounting a revolution and challenging the elite for their wealth. In that case trade integration mandates expansion of the pampered bureaucracy. Therefore, trade integration may actually reduce economic efficiency. The econometric results provide supportive evidence for our model.

Suggested Citation

  • Caleb Stroup & Benjamin Zissimos, 2011. "Pampered Bureaucracy, Political Stability, and Trade Integration," Vanderbilt University Department of Economics Working Papers 1105, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:1105
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    Cited by:

    1. Xuepeng Liu & Emanuel Ornelas, 2014. "Free Trade Agreements and the Consolidation of Democracy," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 29-70, April.

    More about this item

    Keywords

    Efficiency; inefficient institutions; property rights; social conflict; trade integration.;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F10 - International Economics - - Trade - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights

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