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Demagogues and the Fragility of Democracy

Dan Bernhardt (), Stefan Krasa and Mehdi Shadmehr
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Stefan Krasa: University of Illinois
Mehdi Shadmehr: University of North Carolina at Chapel Hill

QAPEC Discussion Papers from Quantitative and Analytical Political Economy Research Centre

Abstract: We investigate the susceptibility of Democracy 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 dis-investment policies, forcing far-sighted 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.

Date: 2021
New Economics Papers: this item is included in nep-cdm and nep-pol
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