Working Paper: CEPR ID: DP2653
Authors: Jody Overland; Kenneth Simons; Michael Spagat
Abstract: We model growth in dictatorships facing each period an endogenous probability of ‘political catastrophe’ that would extinguish the regime's wealth extraction ability. Domestic capital exhibits a bifurcation point determining economic growth or shrinkage. With low initial domestic capital the dictator plunders the country's resources and the economy shrinks. With high initial domestic capital the economy eventually grows faster than is socially optimal.
Keywords: bifurcation; dictatorship; growth; political economy
JEL Codes: D90; O10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Domestic Capital (E22) | Political Stability (P26) |
| Political Stability (P26) | Economic Growth (O49) |
| Domestic Capital (E22) | Economic Growth (O49) |
| Low Domestic Capital (F21) | Political Catastrophe (H12) |
| Political Catastrophe (H12) | Economic Decline (N14) |
| Sufficient Domestic Capital (F21) | Growth Strategies (O00) |
| Insufficient Domestic Capital (F21) | Resource Plundering (Q34) |
| Resource Plundering (Q34) | Economic Deterioration (F69) |