infonet-economy

In this paper we study the dynamics of political institutions and
the different public policies they imply. While political institutions
are influenced by economic development, they are in turn a key determinant
of the development process. In particular, democratic institutions
implement different public policies than oligarchies, and
therefore imply different economic outcomes. Economic development
in turn increases the likelihood of transitions from oligarchy
to democracy because it changes the relative costs for and benefits
from the public policies arising under democratic regimes. We show
that different scenarios of political development can arise endogenously:
democratic transitions under the shadow of social conflict
and democratic transitions initiated by the oligarchic elite. Moreover,
we show that democratic regimes tend to provide more efficient
public policies, and more redistribution than oligarchic regimes. The
results are compared to historical and empirical evidence, and the
consequences of the simplifying assumptions are discussed in detail.