Oligarchic Versus Democratic Societies

Daron Acemoglu

No 47, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper develops a model to analyze economic performance under different political regimes. An oligarchic society, where political power is in the hands of major producers, protects their property rights, but also tends to erect significant entry barriers against new entrepreneurs. Democracy, where political power is more widely di used, imposes redistributive taxes on producers, but tends to avoid entry barriers. When taxes in democracy are high and the distortions caused by entry barriers are low, an oligarchic society achieves greater efficiency. Nevertheless, because comparative advantage in entrepreneurship shifts away from the incumbents, the inefficiency created by entry barriers in oligarchy deteriorates over time. The typical pattern is therefore one of rise and decline of oligarchic societies: of two otherwise identical societies, the one with an oligarchic organization will first become richer, but later fall behind the democratic society. I also discuss how democratic societies may be better able to take advantage of new technologies, how an oligarchic society might transition to democracy because of within-elite conflict, and how the unequal distribution of income in oligarchy supports the oligarchic institutions and may keep them in place even when they become significantly costly to society.

Keywords: democracy; economic growth; entry barriers; oligarchy; political economy; redistribution; sclerosis. (search for similar items in EconPapers)
JEL-codes: O10 P16 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2007
New Economics Papers: this item is included in nep-cdm, nep-dev, nep-pol and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Journal Article: Oligarchic Versus Democratic Societies (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:47

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