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A Dynamic Theory of Competence, Loyalty and Stability in Dictatorships
The B.E. Journal of Macroeconomics (Topics) , 12(1), 2012, pp.1-39
Abstract: This paper presents a dynamic model of power competition in a nondemocracy. In each period, a ruler from an incumbent dynasty is challenged. If he survives, he hands over power to a (biological or ideological) offspring. He can control his offspring's chances of surviving future threats, by choosing how competent and loyal administrators to hire, and how many. The society can stay for a long time on a volatile path where subsequent dynasties of rulers regularly replace one another, each purging the preceding dynasty's competent administrators, replacing them with loyalists, thus keeping competence bouncing around a low level. This may be followed by an endogenous transition to a path without such purges and a simultaneous rise in competence.
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