Economics of Governance

, Volume 14, Issue 1, pp 1–22 | Cite as

Financial integration in autocracies: Greasing the wheel or more to steal?

Original Paper

Abstract

This paper analyzes the influence of financial integration on institutional quality. We construct a dynamic political-economic model of an autocracy in which a ruling elite uses its political power to expropriate the general population. Although financial integration reduces capital costs for entrepreneurs and thereby raises gross incomes in the private sector, the elite may counteract this effect by increasing the rate of expropriation. Since de facto political power is linked to economic resources, financial integration also has long run consequences for the distribution of power and for the rise of an entrepreneurial class.

Keywords

Institutions Capital mobility Political economy 

JEL Classification

F21 O16 P48 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.RWTH Aachen UniversityAachenGermany
  2. 2.International EconomicsJohannes Gutenberg University MainzMainzGermany

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