Economic Origins of Dictatorship and Democracy by Robinson James A. & Daron Acemoglu

Author:Robinson, James A. & Daron Acemoglu [Robinson, James A.]
Language: eng
Format: mobi
Publisher: Cambridge University Press - A
Published: 2005-12-18T16:00:00+00:00

(6.16)

so that the payoff from revolution must be greater when µH = 0. Because Vp(R, µH) is monotonically increasing and continuous in µ, by the intermediate value theorem there exists a unique µ* ∈(0, 1), such that when µH = µ*:

(6.17)

When µ < µ*, concessions do not work so the elites are forced to either democratize or repress. When µ ≥ µ*, they can prevent revolution by temporary redistribution, which is always preferable to them when the alternative is democratization (because with democratization, redistribution is not temporary but rather permanent). In this case, the tax that the elites set, which we denote by, will be set exactly to leave the citizens indifferent between revolution and accepting concessions under a nondemocratic regime - that is,satisfies the equation Vp(N, µH, τN= ) = Vp(R, µH).

To determine equilibrium actions, we need to compare the payoffs to the elites from staying in power using redistribution and from democracy to the cost of repression. Without loss of generality, we limit attention to situations in which the elites play a strategy of always repressing rather than more complicated strategies of repressing sometimes and using redistribution other times (this also is without generality because of the “one-shot deviation” principle, discussed in greater detail in the next chapter; see also Fudenberg and Tirole 1991, pp. 108-10). By standard arguments, these values satisfy the Bellman equations:

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