A Theory of Political Transitions

American Economic Review · 2001 · Volume 91 · Issue 4

Abstract

We develop a theory of political transitions inspired by the experiences of Western Europe and Latin America. Nondemocratic societies are controlled by a rich elite. The initially disenfranchised poor can contest power by threatening revolution, especially when the opportunity cost is low, for example, during recessions. The threat of revolution may force the elite to democratize. Democracy may not consolidate because it is redistributive, and so gives the elite an incentive to mount a coup. Highly unequal societies are less likely to consolidate democracy, and may end up oscillating between regimes and suffer substantial fiscal volatility.

Keywords

Conflict, Conflict Resolution, Alliances, Formal and Informal Sectors, Shadow Economy, Institutional Arrangements, Personal Income, Wealth, and Their Distributions, Capitalist Systems: Political Economy

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