Political entry, public policies, and the economy

Abstract

This paper presents a theory of competition in dictatorships, in which the possible equilibrium political market structures range from pure monopoly (uncontested kleptocracy with high entry barriers) to perfectly competitive (benevolent dictatorship with regular leadership turnover). Leaders compete sequentially and are constrained by the threat of entry, their ability to tax, or both, so that a dictator with no challengers may nonetheless implement policies in the public interest. By focusing on the incentives for political entry, our model helps to classify regimes and to clarify some of the political science debate as to whether political monopoly power is properly measured by the size of political entry barriers or the frequency of leadership turnover. Moreover, we offer economic interpretations of why some dictatorial regimes are uncontested, why there are good and bad dictators, why nondemocratic countries are associated with lower wages, why resource abundant countries tend to be nondemocratic, and how technological change affects political development. Finally, we show how external support of opposition political parties and other policies designed to promote democracy may actually have the unintended consequences of discouraging political competition.