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Dictators and Oligarchs: A Dynamic Theory of Contested Property Rights

Author

Listed:
  • Sergei Guriev
  • Konstantin Sonin

    (State University Higher School of Economics)

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 property rights will emerge spontaneously. We explicitly model a dynamic game between the 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.

Suggested Citation

  • Sergei Guriev & Konstantin Sonin, 2009. "Dictators and Oligarchs: A Dynamic Theory of Contested Property Rights," Post-Print hal-03415733, HAL.
    • Handle: RePEc:hal:journl:hal-03415733
    DOI: 10.1016/j.jpubeco.2008.07.003
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    2. Kevin Sheedy & Bernardo Guimaraes, 2011. "A model of equilibrium institutions," 2011 Meeting Papers 49, Society for Economic Dynamics.
    3. Ricardo Nieva, 2021. "Heterogeneous coalitions and social revolutions," Rationality and Society, , vol. 33(2), pages 229-275, May.
    4. Aram Grigoryan & Mattias Polborn, 2018. "Insecure Property Rights and the Missing Middle," CESifo Working Paper Series 7203, CESifo.
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    6. Van Long, Ngo, 2013. "The theory of contests: A unified model and review of the literature," European Journal of Political Economy, Elsevier, vol. 32(C), pages 161-181.
    7. Aköz, Kemal Kivanç & Barber IV, Benjamin & Jensen, Jeffrey & Zenker, Christina, 2018. "Revisiting the democracy-private investment nexus: Does inequality matter?," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1215-1233.
    8. Djumashev, Ratbek & Abdullaev, Bekzod, 2017. "Crime, Transition, and Growth," MPRA Paper 80842, University Library of Munich, Germany.
    9. Djankov, Simeon, 2016. "The divergent postcommunist paths to democracy and economic freedom," LSE Research Online Documents on Economics 118966, London School of Economics and Political Science, LSE Library.
    10. Bernardo Guimaraes & Kevin D. Sheedy, 2017. "Guarding the Guardians," Economic Journal, Royal Economic Society, vol. 127(606), pages 2441-2477, November.
    11. D. Acemoglu & J. Robinson, 2013. "Economics versus politics: pitfalls of policy advice," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 12.
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    13. Gehlbach, Scott & Keefer, Philip, 2011. "Investment without democracy: Ruling-party institutionalization and credible commitment in autocracies," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 123-139, June.
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    17. Li, Yuan & Gilli, Mario, 2014. "Accountability in Autocracies: The Role of Revolution Threat," Stockholm School of Economics Asia Working Paper Series 2014-30, Stockholm School of Economics, Stockholm China Economic Research Institute, revised 06 Mar 2014.
    18. Alexander Libman, 2018. "Post-Soviet Trade and Institutional Quality: Subnational Evidence," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 3, pages 115-137.
    19. Daniel Leonard & Ngo Van Long, 2012. "Endogenous Changes in Property Rights Regime," The Economic Record, The Economic Society of Australia, vol. 88(280), pages 79-88, March.

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