On Dictatorship, Economic Development and Stability

It can also be the mortality risk in a framework with probabilistic survival as in Usher
(1989). In our approach, insurrection leads to anarchy and the cost of rebelion is the loss
of social order. This loss emphasizes the cost of an institutional vacuum. Then, people
have to compare their welfare in dictatorship with that in anarchy. If the households
consider that repression is too high and their economic welfare too low, they may plan an
insurrection and depose the dictator. If they do so, then τt = 0 and pt = 0; they get rid of
the burden of the dictator’s consumption but also the authority setting the tax rate and
the provision of social order. All the institutions collapse so that the individual rights, as
few as they were, are no longer guaranteed and there is no longer an established authority
to make any decision. This situation corresponds to anarchy where everyone has to fear
everyone.

At date t, the dictator holds power and imposes a tax rate to the households. At the end
of the period t, the households must make a decision about to rise against the dictator
or not and, hence, tolerate or depose the dictator at period t + 1. The decision is made
after comparing the expected welfare in dictatorship and that in anarchy. If the gain of
insurrection in terms of consumption and social order is higher than the loss, then people
revolt. If they do not overthrow the dictator, their intertemporal utility is as follows:

ln μ(1 Twt) + βln μ(1 - ^τt +1)Rt₊¹ β(1 - ^τt)^wt) +ln(pt + l) + βln(Pt+1 + l)

If they topple the dictator from power, their intertemporal utility is:

ln μ )+β ln μ^Rt+1 T+T' )^wt )+ln( pt+^ι )+β ln^ι
15

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