The good, the bad, and the civil society

• We analyze autocracy and democracy based on their difference in leadership selection.
• This single difference explains a wealth of salient empirical patterns.
• It results in weaker civil society in autocracy.
• It results in larger cross-country variations among autocracies.
• It results in more volatility in economic performance within a given autocracy.

There are three signature features of autocracies. First, there is a wide variety across autocracies in terms of economic performance: some do much better and some much worse than democracies. Second, economic performance of a given autocracy is more sensitive to leader quality, and exhibits higher volatility. Third, all autocracies, good or bad, tend to have weaker civil societies than democracies do. We attribute these features to the core of the autocratic political institution: the incumbent leader selects the future leader as opposed to citizens at large selecting the future leader under democracy. We deliver our analysis in an overlapping-generations model where two kinds of dynamic free-riding problems arise. The first arises among different generations of citizens in implementing far-sighted policies. Political leaders come in two types, good ones aim to correct this first kind of dynamic free-riding problem, while bad ones do not care and only aim to steal public assets. Both types need a weak civil society to achieve their goals, but a second dynamic free-riding problem arises among different leaders when it comes to weakening the civil society. The autocratic leader-selection mechanism helps resolve this second dynamic free-riding problem, results in a continuously weakened civil society, and generates large variations of economic performances both within a given autocracy and across different autocracies. A rich set of comparative statics is derived.