Policy change and coups: The role of income inequality and asset specificity

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Abstract
Building on the models developed by Boix, Acemoglu, and Robinson on the relationship between economic structures and regime change, we develop a theory that emphasises structural characteristics of societies and the effects of policy change in such circumstances. We posit that significant policy change in an unequal or asset-specific society induces coups against the incumbent political leader by the losing faction of the elites seeking to prevent or cut losses associated with the policy shifts. Our empirical analysis indicates that the risk of a coup rises considerably during a period of a significant policy change in a society with a skewed distribution of income and one dominated by asset-specific production, such as oil, mining, and agriculture.

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