DP2653 Political Instability and Growth in Dictatorships

Author(s): Jody Overland, Kenneth L Simons, Michael Spagat
Publication Date: December 2000
Keyword(s): Bifurcation, Dictatorship, Growth, Political Economy
JEL(s): D90, O10
Programme Areas: Public Economics, Transition Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2653

We model growth in dictatorships facing each period an endogenous probability of ?political catastrophe? that would extinguish the regime's wealth extraction ability. Domestic capital exhibits a bifurcation point determining economic growth or shrinkage. With low initial domestic capital the dictator plunders the country's resources and the economy shrinks. With high initial domestic capital the economy eventually grows faster than is socially optimal.