TY - UNPB

T1 - Why are Rich Countries more Politically Cohesive?

AU - Dalgaard, Carl-Johan Lars

AU - Olsson, Ola

PY - 2009

Y1 - 2009

N2 - We document empirically that rich countries are more politically cohesive than poorer countries. In order to explain this regularity, we provide a model where political cohesion is linked to the emergence of a fully  functioning market economy. Without market exchange, the welfare of inherently selfish individuals will be mutually independent. As a result, political negotiations, echoing the preferences of the citizens of society, will be dog-eat-dog in nature. Whoever has greater bargaining power will be willing to make decisions that enhance the productivity of his supporters at the expense of other groups in society. If the gains from specialization become sufficiently large, however, a market economy will emerge. From being essentially non-cohesive under self-sufficiency, the political decision making process becomes cohesive in the market economy, as the welfare of individuals will be mutually interdependent due to the exchange of goods. We refer to this latter state as "capitalist cohesion".

AB - We document empirically that rich countries are more politically cohesive than poorer countries. In order to explain this regularity, we provide a model where political cohesion is linked to the emergence of a fully  functioning market economy. Without market exchange, the welfare of inherently selfish individuals will be mutually independent. As a result, political negotiations, echoing the preferences of the citizens of society, will be dog-eat-dog in nature. Whoever has greater bargaining power will be willing to make decisions that enhance the productivity of his supporters at the expense of other groups in society. If the gains from specialization become sufficiently large, however, a market economy will emerge. From being essentially non-cohesive under self-sufficiency, the political decision making process becomes cohesive in the market economy, as the welfare of individuals will be mutually interdependent due to the exchange of goods. We refer to this latter state as "capitalist cohesion".

KW - Faculty of Social Sciences

KW - economic growth

M3 - Working paper

BT - Why are Rich Countries more Politically Cohesive?

PB - Department of Economics, University of Copenhagen

ER -