Artikel
Capitalist investment and political liberalization
We consider a simple political-economic model where capitalist investment is constrained by the government's temptation to expropriate. Political liberalization can relax this constraint, increasing the government's revenue, but also increasing the ruler's political risks. We analyze the ruler's optimal liberalization, where our measure of political liberalization is the probability of the ruler being replaced if he tried to expropriate private investments. Poorer endowments can support reputational equilibria with more investment, even without liberalization. So we find a resources curse, where larger resource endowments can decrease investment and reduce the ruler's revenue. The ruler's incentive to liberalize can be greatest with intermediate resource endowments. Strong liberalization becomes optimal in cases where capital investment yields approximately constant returns to scale. Adding independent revenue decreases optimal liberalization and investment. Mobility of productive factors that complement capital can increase incentives to liberalize, but equilibrium prices may adjust so that liberal and authoritarian regimes co-exist.
- Language
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Englisch
- Bibliographic citation
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Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 5 ; Year: 2010 ; Issue: 1 ; Pages: 73-91 ; New Haven, CT: The Econometric Society
- Classification
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Wirtschaft
Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- Subject
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Political liberalization
resources curse
expropriation risk
- Event
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Geistige Schöpfung
- (who)
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Myerson, Roger B.
- Event
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Veröffentlichung
- (who)
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The Econometric Society
- (where)
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New Haven, CT
- (when)
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2010
- DOI
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doi:10.3982/TE570
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Myerson, Roger B.
- The Econometric Society
Time of origin
- 2010