Efficiency, Policy Selection, and Growth in Democracy and Autocracy: A Formal Dynamical Model

Abstract

The main focus of this paper is the impact of efficiency losses, related to public capital stock, on the prospects of economic growth in democratic and autocratic political environments. We introduce a distinction between two types of efficiency loss: along with the loss of public capital during its accumulation, we take into account the process of capital stock depreciation. We demonstrate that the decrease in efficiency of any type makes the probability of long-run growth higher for autocracies; however, in the presence of high efficiency, democracies tend to perform better. The results were obtained by formal analysis and computational experiments, realized on the basis of an original dynamical model.