Munich Personal RePEc Archive

Bi-communalism and the economic origins of democracy: a case study

Khemraj, Tarron (2013): Bi-communalism and the economic origins of democracy: a case study.

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Abstract

The paper shows how democratic elections in a bi-communal society with entrenched ethnic voting results in an elected oligarchy in which elites of one ethnic group control the allocation of scarce economic resources. Using a simple strategic game, the paper shows that the control of resources results in the Nash equilibrium of uneven development. Heterogeneous agents are included in the model, which is solved for the conditions under which democratic consolidation might occur. Token resource transfers from elites to other groups will tend not to guarantee consolidation. Remittances to the masses tend to prevent democratic consolidation, while bi-lateral grants to an elite dominated government prevent consolidation under some restricted conditions. Constitutional institutions might be necessary to incentivize explicit cooperation – the anti-Nash equilibrium.

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