Political labor market, government policy, and stability of a non-democratic regime

Lazarev, Valery (2007): Political labor market, government policy, and stability of a non-democratic regime.

Abstract

An important source of stability of a hierarchical non-democratic political regime, such as that of the Soviet Union in the past or China today, is the rulers’ ability to buy the services and political support of activists recruited from the working population in the monopsonistic political labor market. Implicit contracts that underlie this exchange require retirement of incumbents to allow for deferred promotion of activists into rent-paying positions. An analysis of optimal promotion contracts shows that regime stability is consistent with a high income gap between the rulers and the working population, strengthened when government pursues an active investment policy, and not affected positively by government spending on public goods. Predictions of the promotion contract model are tested using Soviet data for the period 1956 to 1968.

• Item Type: MPRA Paper
• Institution: Hoover Institution and University of Houston Clear Lake
• Language: English
• Keywords: non-democracy; political rents; hierarchy; promotion incentives; implicit contract
• Subjects: P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P26 - Political Economy ; Property Rights; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J45 - Public Sector Labor Markets; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D70 - General

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