Endogenous Political Instability

Ryo Arawatari and Kazuo Mino

No 07-32-Rev, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: In this paper, we construct a simple dynamic two-party electoral competition model in which the degree of political instability is endogenously determined. We consider the campaign contributions as stock variable which is gradually accumulated by both party fs direct investment and induced the Markov-perfect Nash equilibrium. We then examine the stability of the symmetric steady state and find that it may be either totally stable or unstable depending on the parameter values involved in the model. We also found that under certain conditions, at least near the symmetric steady state, there exists indeterminacy of equilibrium path: there exist both stable and unstable paths, that is, under given levels of political assets, both high instability political system and low instability political system can emerge depending on expectations of political parties.

Keywords: Political assets; Dynamic political economy; Differential game; Markovperfect Nash equilibrium; Two-party model (search for similar items in EconPapers)
JEL-codes: C73 D72 D78 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2007-08, Revised 2007-11
New Economics Papers: this item is included in nep-cdm, nep-dge, nep-gth and nep-pol
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Working Paper: Endogenous Political Instability (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0732r

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