FEEM working papers "Note di lavoro" series
2011 .065

Autocracies and Development in a Global Economy: A Tale of Two Elites


Authors: Anders Akerman, Anna Larsson, Alireza Naghavi
Series: Economy and Society
Editor: Giuseppe Sammarco
Keywords: Autocracy, Growth, Political Elites, Landowners, Capitalists, Growth Miracles, Trade, Comparative Advantage, Capital Mobility, Property Rights
JEL n.: F10, F20, P14, P16, O10, O24

Abstract

Data on the growth performances of countries with similar comparative (dis)advantage and political institutions reveal a striking variation across world regions. While some former autocracies such as the East Asian growth miracles have done remarkably well, others such as the Latin American economies have grown at much lower rates. In this paper, we propose a political economy explanation of these diverging paths of development by addressing the preferences of the country’s political elite. We build a theoretical framework where factors of production owned by the political elites differ across countries. In each country, the incumbent autocrat will cater to the preferences of the elites when setting trade policy and the property rights regime. We show how stronger property rights may lead to capital accumulation and labor reallocation to the manufacturing sector. This, in turn, can lead to a shift in the comparative advantage, a decision to open up to trade and an inflow of more productive foreign capital. Consistent with a set of stylised facts on East Asia and Latin America, we argue that strong property rights are crucial for success upon globalization.

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