Taming the (not So) Stationary Bandit: Turnover of Ruling Elites and Protection of Property Rights
Abstract: We propose a theoretical model and provide empirical evidence that show that rotation of ruling elites could improve property rights protection, and that such association holds for non-democratic political regimes when it is based on elites’ concerns about security of their own property rights in the event they lose power. Such incentives provide a solution to credible commitment problem in maintaining secured property rights when institutional restrictions on expropriation are weak or absent. It is further shown that the strength of such immediate incentives to maintain secured property rights depends positively on the size of elites’ market assets. These conclusions are confirmed empirically by using a panel of 58 developed and developing nations for the period from 1975 through 2005.