World Price Shocks, Income, and Democratization

Benjamin Zissimos

No 1412, Discussion Papers from University of Exeter, Department of Economics

Abstract: This paper shows how a world price shock can increase the likelihood that democratization must be used to resolve the threat of revolution. Initially, a ruling elite may be able to use trade policy to maintain political stability. But a world price shock can push the country into a situation where the elite face a commitment problem that only democratization can resolve. Because the world price shock may also reduce average incomes, the model provides a way to understand why the level of national income per capita and democracy may not be positively correlated. The model is also useful for understanding dictatorial regimes ?rebuttal of World Bank calls to keep their export markets open in the face of the 2007-08 world food crisis.

Keywords: Democracy; institutions; price shocks; social con?ict; trade policy. (search for similar items in EconPapers)
JEL-codes: D30 D74 F11 F13 P16 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-pol
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https://exetereconomics.github.io/RePEc/dpapers/DP1412.pdf (application/pdf)

Related works:
Journal Article: World Price Shocks, Income, and Democratization (2015)
Working Paper: World Price Shocks, Income, and Democratization (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:1412

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