Political Economy in a Changing World

73 Pages Posted: 19 Jun 2013 Last revised: 16 May 2014

See all articles by Daron Acemoglu

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Georgy Egorov

Northwestern University - Kellogg School of Management; NBER

Konstantin Sonin

University of Chicago - Harris School of Public Policy; Higher School of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2014

Abstract

We provide a general framework for the analysis of the dynamics of institutional change (e.g., democratization, extension of political rights, or repression of different groups), and how these dynamics interact with (anticipated and unanticipated) changes in the distribution of political power and in economic structure. We focus on Markov Voting Equilibria, which require that economic and political changes should take place if there exists a subset of players with the power to implement such changes and who will obtain higher expected discounted utility by doing so. Assuming that economic and political institutions as well as individual types can be ordered, and preferences and the distribution of political power satisfy natural "single crossing" (increasing differences) conditions, we prove the existence of a pure-strategy equilibrium, provide conditions for its uniqueness, and present a number of comparative static results that apply at this level of generality. We then use this framework to study the dynamics of political rights and repression in the presence of radical groups that can stochastically grab power and the dynamics of collective experimentation over institutions.

Keywords: Markov Voting Equilibrium, dynamics, median voter, stochastic shocks, extension of franchise, repression

JEL Classification: D71, D74, C71

Suggested Citation

Acemoglu, Daron and Egorov, Georgy and Sonin, Konstantin, Political Economy in a Changing World (April 2014). MIT Department of Economics Working Paper No. 13-12. Available at SSRN: https://ssrn.com/abstract=2281557 or http://dx.doi.org/10.2139/ssrn.2281557

Daron Acemoglu (Contact Author)

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Georgy Egorov

Northwestern University - Kellogg School of Management ( email )

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Konstantin Sonin

University of Chicago - Harris School of Public Policy ( email )

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Higher School of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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