Demagogues and the Economic Fragility of Democracies

Dan Bernhardt, Stefan Krasa and Mehdi Shadmehr

American Economic Review, 2022, vol. 112, issue 10, 3331-66

Abstract: We investigate the susceptibility of democracies to demagogues, studying tensions between representatives who guard voters' long-run interests and demagogues who cater to voters' short-run desires. Parties propose consumption and investment. Voters base choices on current-period consumption and valence shocks. Younger/poorer economies and economically disadvantaged voters are attracted to the demagogue's disinvestment policies, forcing farsighted representatives to mimic them. This electoral competition can destroy democracy: if capital falls below a critical level, a death spiral ensues with capital stocks falling thereafter. We identify when economic development mitigates this risk and characterize how the death-spiral risk declines as capital grows large.

JEL-codes: D72 E21 E22 E32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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DOI: 10.1257/aer.20211125

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