current income tax rate and the current capital stock. The system of these three equations
is computed by eliminating the Lagrange multipliers from the equations (16)-(18), and
by solving the new system to find the expressions of kt+1 , τt+1 and qt+1 .
4.1 Steady states
Proposition 3 Any politically stable dictatorship characterized by the dynamic system
(26)-(28) admits a unique steady state.
Proof:
By solving the system (26)-(28) at the steady state, we obtain the following unique solu-
tion:
(1 + ρ )[ β (1 — α ) l ]2 + αβ (1 — α ) l
α (1 + β )
l (β(1 + ρ)(1 — α)l + α)1-α
(29)
(30)
1 α ∖ α
A (α)1 -α (β⅛+β))
1
1 + α,----
β (1+ ρ )(1 -α ) /
Hence, the dictator’s steady state consumption is:
__ [β(1 — α)l]2-α AA A ∙ αA j1 -Λ μβ(1 — α)l ∖ α l
g = [β(1 — α)l + Aα]2(1 -α) ∖α + [β(1 — α)lJ ) \ 1 + β — ~ A2â
If the insurrection constraint is not binding, then the steady state solution is the same as
in proposition 1.¥
Proposition 3 gives the steady state of dictatorship that is politically stable. The insurrec-
tion constraint makes the rate of predation, q , one of the variables determining the steady
28
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