World Price Shocks, Income, and Democratization

13 Pages Posted: 10 Mar 2015

See all articles by Ben Zissimos

Ben Zissimos

Vanderbilt University - College of Arts and Science - Department of Economics

Date Written: February 27, 2015

Abstract

This paper shows how a world price shock can increase the likelihood that democratization must be used to resolve the threat of revolution. Initially, a ruling elite may be able to use trade policy to maintain political stability. But a world price shock can push the country into a situation where the elite face a commitment problem that only democratization can resolve. Because the world price shock may also reduce average incomes, the model provides a way to understand why the level of national income per capita and democracy may not be positively correlated. The model is also useful for understanding dictatorial regimes’ rebuttal of World Bank calls to keep their export markets open in the face of the 2007-08 world food crisis.

Keywords: democracy, institutions, price shocks, social conflict, trade policy

JEL Classification: D30, D74, F11, F13, P16

Suggested Citation

Zissimos, Ben, World Price Shocks, Income, and Democratization (February 27, 2015). CESifo Working Paper Series No. 5228, Available at SSRN: https://ssrn.com/abstract=2576208 or http://dx.doi.org/10.2139/ssrn.2576208

Ben Zissimos (Contact Author)

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States

HOME PAGE: http://www.vanderbilt.edu/econ/cv/ZissimosCV.pdf

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