On Dictatorship, Economic Development and Stability

4 Political stability of dictatorship

In the previous section, any dictatorship was shown to admit a unique and stable steady
state. The only imposed constraint on the dictator’s behavior was a constraint of in-
tertemporal economic feasibility. It turned out that this economic constraint, alone, did
not exert a limitation on the dictator’s preferences. We want next to take the political
constraint (equation 13) into account in the model. This additional constraint represents
the potential insurrection threat as a reaction of the people, or at least a group of people,
to the behavior of the dictator. This is the Sword of Damocles under which any dictator

lives continuously. We will now analyze dictatorship under both constraints.

The dynamical system of dictatorship with insurrection threat depends on whether the
insurrection constraint is binding or not. If not, the system is the same as in section 4. If
the threat is binding, then the first-order conditions are (16)-(18). The dynamic system
of dictatorship with insurrection threat is then the following:

kt+1 = 1 + β(^{1 - τ}t)(¹ - ^α)Ak^α                            (²6)

^τt+¹ = ^{1 -} (1 - qt +      +                                      ⁽²⁷⁾

^[(1 + ρ^{)(1 + β )] 1}-^{σ τ}tk^{α (1 -} qt )^1-σ

^qt+ι = -------1—ɪ---α-ɪ-----             ⁽²⁸⁾

α^{1 -σ} qt^-σ τt +ι kt+ι^{1 -σ}

Equation (26) is the same as equation (20). Equation (27) gives the expected income tax
rate as a function of the current income tax rate and the current capital stock. Equation
(28) gives the expected predation rate as a function of the current predation rate, the

27

<<   26   27   28   29   30   31   32   >>

More intriguing information