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

Finally, the ability of the ruling bureaucracy to raise support in the political labor
market depends on its ability to control the paths of upward income mobility. Thorough
control is never possible. Two major avenues lead to higher incomes that are, at least in part,
independent from the bureaucratic control: higher education and the shadow economy. In a
small and primitive economy, this problem can be contained. A more complex economy
requires, on the one hand, more human capital. This brings about opportunities for higher
incomes for “apolitical” professionals. On the other hand, there is more space for illicit
economic activity, especially in services. Both undermine the regime by carrying off potential
activists, who respond to economic incentives outside of the state-controlled economy.
Therefore, modern economic development produces downward pressure on the supply of
activists and sets the natural limits to the growth of hierarchical regimes.

III. The Soviet political labor market: Institutional framework and data sources

The dataset I use to test the model is a panel of nine states (republics)²⁶ of the former
Soviet Union. The data cover the period of 1956-1968, roughly coinciding with the leadership
of Nikita Khrushchev. This period is characterized by rebounding influx of activists
(increasing admission of candidates to the party) after a trough of the mid-1950s. Economic
development of the period is characterized by the relatively high rate of growth (about 4% per
year) and active investment policy, although there was a marked decelerating trend. There
were no significant political and economic shocks during this period, and the institutional

China may inform us on the impact of sustained growth ion the stability of a bureaucratic regime.

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