Working Paper: NBER ID: w13733
Authors: Robert P. Inman; Daniel L. Rubinfeld
Abstract: We present a model of a peaceful transition from autocracy to democracy using federal governance as a constitutional means to protect the economic interests of the once ruling elite. Under "democratic federalism" the constitution creates an annual policy game where the new majority and the elite each control one policy instrument of importance to the other. The game has a stable, stationary equilibrium that the elite may prefer to autocratic rule. We apply our analysis to South Africa's transition from white, elite rule under apartheid to a multi-racial democracy. We calibrate our model to the South African economy at the time of the transition. Stable democratic equilibria exist for plausible estimates of redistributive preferences and rate of time preference ('impatience') of the new majority during the early years of the new democracy. The future of the democratic federal bargain is less certain under the new populist presidency of Jacob Zuma.
Keywords: Federalism; Democracy; Economic Transition; South Africa
JEL Codes: H11; H77; P26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Federal constitution (K10) | Economic security of elites (F52) |
| Majority-controlled central government + Elite-controlled provinces (H10) | Redistributive taxation less than maximal (H23) |
| Federal governance structures (H10) | Prevent expropriation of elite assets (P26) |
| Federalism (H77) | Elite control (D72) |
| Changing political leadership (D72) | Sustainability of federal arrangement (H77) |