and violence as an economic activity competing with production activity (Usher (1989),
Grossman and Noh (1990), Grossman (1991), Hirshleifer (1991), Olson (2000)). The in-
dividuals face a tradeoff between the appropriative and production activities creating a
threat to both economic development and social order. The resulting need for security
gives the Hobbesian justification for the establishment of the state. However, the central-
ization of violence through the state could also lead to the centralization of predation, also
hampering economic development (North (1990), Grossman and Noh (1990), Grossman
(1996), and Wintrobe (1998)). Even in democracies economic development can be halted
by corrupt governments (Kanczuk (1998) and Azariadis (2001)). The question is then
why inefficient political institutions are not necessarily unstable. Dictatorial regimes can
resist democratization because wealth inequality might be such that it is too costly for
a governing elite to accept an inevitable redistribution under a democratic regime (Ace-
moglu and Robinson 2001). Another explanation can be the difficult cooperation that
the toppling of a dictator requires, especially when the ruler can use plenty of resources
to divide and rule (Acemoglu, Robinson, and Verdier 2004). However, the difficulty of
democratization can also be accounted for by the possible existence of a violent transition
on the road to democracy. This potential violence may lock populations in a dictatorial
statu quo. This is the view that our paper takes up by analyzing the economic perfor-
mance and the stability of dictatorship in relation to anarchy. In many societies, the gain
of deposing a dictator must be assessed against the risk of anarchy. This threat may be
sufficient for the people to prefer keeping the dictator.
Section 2 characterizes the model of dictatorship. The relationship between dictatorship