05 February 2010

Article: When will a Dictator be Good?

Ling Shen, "When will a Dictator be Good?" ("Economic Theory",
31 [2], May 2007: pp. 343-66).

Abstract: "Dictatorship is the predominant political system in many developing countries. However, different dictators act quite differently: a good dictator implements growth-enhancing economic policies, e.g., investment in public education and infrastructure, whereas a bad dictator taxes her citizens for her own consumption [EK: How many female dictators have there been in history?]. The present paper provides a theoretical model by deriving underlying determinants of dictatorial behavior. We assume that the engine of economic growth is private investment. It can increase the productivity of individuals who invest, as well as the aggregate technological level. A good dictator encourages this investment in order to tax more. However, the cost of this encouragement is that the ensuing higher growth rate will induce earlier democratization. In this paper we will illustrate the risk of choosing a growth-enhancing policy, while leading to additional tax revenues in the short-run will also increase the likelihood of a revolution resulting in the eventual overthrow of the dictator. Furthermore, we will find that the higher the return from private investments the less likely the dictator will be a good one. Contrary to McGuire and Olson [...] we find that a long life-time does not always induce positive incentives among dictators."

The article can be read free of charge here:


Excerpt: "Most academic studies of political economy [...] focus on the democratic political system, [...] few studies shed light on dictatorship, although most people on earth live in such regimes. A puzzling phenomenon in dictatorial economies is that they can achieve dramatically different economic growth rates."

Ling Shen's most recent publication (co-authored with Marc Schiffbauer) is titled "Democracy vs. Dictatorship: Comparing the Evolution of Economic Growth under Two Political Regimes" ("Economics of Transition", 18 [1], January 2010: pp. 59-90):


From the abstract: "A democratic society is often regarded as a prerequisite for economic growth and development. Yet, most empirical studies are not capable of identifying a positive link between GDP growth and democracy indexes. In addition, it is a stylized empirical fact that: (i) most developing countries are dictatorships; and (ii) many poor dictatorships have experienced high growth performances and emerged from poverty such as South Korea, China and Egypt. Against this background, it is of interest to analyse in which ways the growth performance between autocratic and democratic economies may differ, in particular among low-income countries. [...] In this framework, we demonstrate that poor but large and stable dictatorships exhibit a higher equilibrium growth rate than comparable (equally poor) democracies."

I wasn't able to access the full text of the published version of this article. As of today, only a draft seems to be available on Shen's university website.

Ling Shen is now an Assistant Professor in the School of Economics at the Shanghai University of Finance and Economics.

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