For millennia, autocracy was the prevalent form of political organization. Despite the
advancement of democracy during the last two centuries, the majority of the world’s
population still lives under regimes that range from outright dictatorship to oligarchy,
embellished with nominally democratic institutions. Moreover, during the twentieth century, a
number of industrial and many developing countries reverted to authoritarian regimes after
periods of significant democratic development. Resilience of non-democratic regimes,
recurrence of dictatorship, and conditions that enable transition to democracy are therefore
research problems that need to be addressed by economists.
Economic analysis of non-democracy and political transitions is a relatively new and
growing area that was probably prompted by the tide of democratic transitions in the
developing world and former socialist countries in the late 1980s - early 1990s. Theoretical
models developed thus far can be divided into two groups. The first group extends
“Leviathan” interpretation of government (Geoffrey Brennan and James Buchanan, 1980) into
the area of non-democratic regimes by assuming the rulers who use their power to maximize
net revenue raised by taxing the dominated population (Mancur Olson, 1993; Martin McGuire
and Olson, 1996; Boaz Moselle and Benjamin Polak, 2001) or to protect their wealth from
being redistributed (Daron Acemoglu and James Robinson; 2000, 2001). The second group
assumes that political power is valuable per se and the rulers’ objective is to maximize the
extent of power or probability of remaining in power (Herschel Grossman and Suk Jae Noh,
1994; Ronald Wintrobe, 1998; Yi Feng and Paul Zak, 1999).
All mentioned works differ in the selection of relevant variables and predictions of
their models, sometimes diametrically. Acemoglu and Robinson (2000), (2001) argue that
high inequality is the major driving force of democratization, supporting this statement by the