By Daron Acemoglu, James Robinson, and Thierry Verdier. Reading for week of January 27, 2004.
Many developing countries have su.ered under the personal rule of "kleptocrats", whoimplement highly ine.cient economic policies, expropriate the wealth of their citizens, anduse the proceeds for their own glorification or consumption. We argue that the success of kleptocrats rests, in part, on their ability to use a "divide-and-rule" strategy, made possible by weakness of the institutions in these societies. Members of society need to cooperate in order to depose a kleptocrat, yet such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move, and redistributing the benefits to those who need to agree to it. Thus the collective action problem can be intensified by threats which remain off of the equilibrium path. In equilibrium, all are exploited and no one challenges the kleptocrat. Kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents; when opposition groups are shortsighted; when the average productivityin the economy is low; and when there is greater inequality between producer groups (because more productive groups are more difficult to buy off).
Published: Tuesday, January 13, 2004
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