Regime Change and Critical Junctures

In this paper we study how a society can transition between different economic and political regimes. When the current regime is elitism, the society is modeled as a collection of units of land where at each of these units there is a member of the elite and a peasant. Members of the elite represent the institutions in place and their role is to choose how extractive the current regime is via setting up different tax rates. The role of peasants is to work the land and pay taxes. At every period with some small probability a critical juncture arrives, giving members of the elite a chance to update institutions (tax rates) and peasants an opportunity to revolt in order to instate a populist regime. Under the populist regime, at each of the units of land there is a citizen whose role is to work the land and enjoy the full output he produces. When a critical juncture arrives in this case, citizens have the option to stage a coup in order to revert back to elitism. In our results we characterize the possible outcomes after a critical juncture and study how the society can transition between regimes depending on the different parameters of the model.