Dictators and Oligarchs: A Dynamic Theory of Contested Property Rights

Konstantin Sonin and Sergei Guriev

No 1072, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: In an economy with weak economic and political institutions, the major institutional choices are made strategically by oligarchs and dictators. The conventional wisdom presumes that as rent-seeking is harmful for oligarchs themselves, institutions such as enforcement of the property rights will emerge eventually. We explicitly model a dynamic game between oligarchs and a dictator, who can contain rent-seeking. The oligarchs choose either a weak dictator (who can be overthrown by an individual oligarch) or a strong dictator (who can only be replaced via a consensus of oligarchs). In equilibrium, no dictator can commit to both: (i) protecting the oligarchs' property rights from the other oligarchs and (ii) not expropriating oligarchs himself. We show that a weak dictator does not limit rent-seeking. A strong dictator does reduce rent-seeking but also expropriates individual oligarchs. We show that even though eliminating rent-seeking is Pareto optimal, weak dictators do get appointed in equilibrium and rent-seeking continues. This outcome is especially likely when economic environment is highly volatile.

Date: 2008
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Related works:
Journal Article: Dictators and oligarchs: A dynamic theory of contested property rights (2009)
Working Paper: Dictators and Oligarchs: A Dynamic Theory of Contested Property Rights (2009)
Working Paper: Dictators and Oligarchs: A Dynamic Theory of Contested Property Rights (2007)
Working Paper: Dictators and Oligarchs: A Dynamic Theory of Contested Property Rights (2007)
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