Oligarchy, Democracy, and State Capacity

29 Pages Posted: 19 May 2021

See all articles by Helios Herrera

Helios Herrera

HEC Montreal

César Martinelli

George Mason University - Department of Economics

Date Written: March 3, 2011


We develop a dynamic political economy model in which investment in the state capacity to levy taxes and deter crime is a policy variable, and we study the evolution of state capacity when policy is chosen by an elite. We show that democratization in the sense of expansion of the elite leads to an increased investment in state capacity and to a reduction in illegal activities, and has non-monotonic effects on tax rates as it reduces the willingness of the elite to engage in particularistic spending but enhances its willingness to provide public goods. Depending on initial conditions, consensual political changes may lead either to democratization or to the entrenchment of an immovable elite.

Keywords: state capacity, democratization, oligarchy

JEL Classification: D72, H11

Suggested Citation

Herrera, Helios and Martinelli, César, Oligarchy, Democracy, and State Capacity (March 3, 2011). Available at SSRN: https://ssrn.com/abstract=1278237 or http://dx.doi.org/10.2139/ssrn.1278237

Helios Herrera

HEC Montreal ( email )

3000, ch. de la Côte-Ste-Catherine
Montréal, Quebec H3T 2A7

HOME PAGE: http://www.hec.ca/en/profs/helios.herrera.html

César Martinelli (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

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