incumbent bureaucrats and activists determine the equilibrium number of party candidates
under a hierarchical regime.
V. Conclusion
Collective bureaucratic control rights over the economy, as opposed to private
property rights, create the possibilities for the incumbent bureaucracy to “buy” support and
rent-augmenting services of the activists in exchange for promises of deferred promotion.
Institutional forms that facilitate the political-economic exchange of this type vary historically
and across countries. What they all have in common is the turnover within the hierarchical
ruling stratum and implicit promotion contracts that provide participation incentives for both
the workers and the ruling bureaucracy. Efficiency of this exchange is a function of the
income gap between workers and bureaucrats: the more thorough the bureaucratic control
over the paths of upward income mobility in the society, the closer its position is to the
monopsony in the political labor market, the more rents can the bureaucracy capture. It also
depends on production technology. Activists’ supervisory service is essentially a labor-
augmenting technology. In an economy with low elasticity of substitution between labor and
capital, this produces a positive correlation between the bureaucrats’ demand for activists and
public investment.
The two groups of factors affecting the supply of activists and the rulers’ demand for
activist services are responsible for the emergence of hierarchical regimes. Most such regimes
were established in the 20th century in the countries that were characterized by high inequality
and were facing developmental challenges (Russia, China, Iran, etc.) or were experiencing
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