All The President’s Money: Market Concentration, Oligarchs and Sanctions in Hybrid Regimes

Publication Date
Financial Markets Group Discussion Papers DP 895
Publication Authors

Hybrid regimes feature combinations of democratic and autocratic attributes. Their common element is a leader who cultivates a clientele of favored firms but also extracts income from them. We study the economic implications of this system in a general equilibrium economy where entrepreneurs can become clients by accepting informal rent-sharing contracts offered by the leader. The model derives the leader’s incentives for creating economic distortions, and explains the emergence of oligarchs as a function of simple (institutional) constraints. We use the model to study the economic impacts of various sanctions, such as the freezing of the leader’s or the oligarchs’ assets, or the withholding of international transfers. Our results shed light on a number of recent and historical examples from hybrid regimes around the world.