Political Entry, Public Policies, and the Economy
This paper presents a theory of competition for political leadership between incumbent leaders and their challengers in which the possible equilibrium political market structures range from pure monopoly (unchallenged dictatorship) to perfectly competitive (ideal democracy). Leaders are constrained by the threat of "entry" or their ability to tax (or both), so that regimes with no challengers may nonetheless implement policies in the public interest. We offer economic interpretations of why democratic countries are associated with higher wages, why resource abundant countries tend to be nondemocratic, and how technological change affects political development. By focusing on the incentives for political entry, we show how trade sanctions and other policies designed to promote democracy may actually have the unintended consequences of discouraging political competition.
We appreciate the comments of Gary Becker, Bill Dougan, Roger Myerson, Jose Plehn-Dujowich, John Sutton, Chad Syverson, Sven Wilson, workshop participants at Buffalo, Clemson, Harvard, and The University of Chicago, and the financial support of the University of Chicago's Stigler Center for the Study of the Economy and the State. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Mulligan, Casey B. & Tsui, Kevin K., 2015. "Political entry, public policies, and the economy," Research in Economics, Elsevier, vol. 69(3), pages 377-397. citation courtesy of