A Theory of Dynastic Cycles

Yinan Li (Stockholm University)

Abstract: This paper proposes a dynamic politico-economic theory on the evolution of dictatorship. I characterize the Markov Perfect Equilibrium of the dynamic game and derive the analytical solution to the equilibrium. The main conclusion is that the demise of any dictatorial regime is inevitable if there are discontinuity of power caused by dictator's physical death and the delegation of the dictator's unbalanced power, which are two common properties shared by all dictatorial regimes. Consistent with historical evidence, the model shows the overall pattern of the evolution of dictatorial regime is increasing real burden on the citizen caused by increasing bureaucrats'tax surcharge due to weakering dictator, and the decreasing fi…scal revenue of the dictator due to the decreasing of tax base, as will cause the demise of dictatorship in the long run.


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