Political Rents, Promotion Incentives, and Support for a Non-Democratic Regime

POLITICAL RENTS, PROMOTION INCENTIVES,

AND SUPPORT FOR A NON-DEMOCRATIC REGIME

Valery Lazarev

Department of Economics, Yale University
New Haven, CT 06520-8269
[email protected]

Abstract

This paper analyzes the economic foundations of a non-democratic political regime, where
the ruling bureaucracy captures rents through collective control over state property and job
assignment. The model developed here yields the equilibrium in the “political labor market,” where
the ruling bureaucracy buys services and political support of activists recruited from the working
population. The underlying implicit contract requires that the incumbent bureaucrats retire after a
certain time to allow for deferred promotion of activists into rent-paying positions. The major
implications are that the stability of a non-democratic regime is consistent with high-income gap
between the rulers and the rest of the population, strengthened when government pursues an active
investment policy, and is not directly affected by public goods provision or the rate of economic
growth. The results of econometric analysis of panel data from former Soviet states for the period
of 1956-1968 confirm the predictions of the model.

Keywords: non-democratic regimes, bureaucracy, hierarchy, political support, promotion
incentives, implicit contract, Soviet Union

JEL codes: D72, J45, N44, P30

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