Effects of Political Monopoly on Economic Development

Abstract

This paper has two objectives. First, it presents a survey of the literature surrounding the relation between political monopoly and economic development. Second, it offers an analysis of how commoners'high degree of tolerance towards unfair inequality of income distribution between theirs and the monopolizing ruling elites leads to poor economic development. We assert that free migration between states causes monopoly rent to shrink because it poses a threat to the ruling elites due to fiscal competition between states. The shrinking in monopoly rent implies a higher level of division of labour, which results in a greater extent of the market and higher aggregate productivity.