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| Author: | Acemoglu, D. |
| Title: | Oligarchic versus democratic societies |
| Journal: | Journal of the European Economic Association
2008 : MAR, VOL. 6:1, p. 1-44 |
| Index terms: | politics democracy efficiency comparative advantage |
| Language: | eng |
| Abstract: | This article develops a model to analyze economic performance under different political regimes. In an "oligarchic" society political power is in the hands of major producers. It protects their property rights but also tends to erect significant entry barriers against new entrepreneurs. Democracy imposes redistributive taxes on producers but tends to avoid entry barriers. An oligarchic society achieves greater efficiency when taxes in democracy are high and the distortions caused by entry barriers are low. The inefficiency created by entry barriers in oligarchy deteriorates over time because comparative advantage in entrepreneurship shifts away from the incumbents. The typical pattern is that an oligarchic society may first become richer, but later fall behind a similar democratic society. |
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