A paper by Gerard Padró-i-Miquel, "The Control of Politicians in Divided Societies: The Politics of Fear," has recently been published in The Review of Economic Studies, October 2007
Autocrats in many developing countries have extracted enormous personal rents from power. In addition, they have imposed ineficient policies including pervasive patronage spending. The author presents a model in which the presence of ethnic identities and the absence of institutionalized succession processes allow the ruler to elicit support from a sizeable share of the population despite large reductions in welfare. The fear of falling under an equally ineficient and venal ruler that favors another group is enough to discipline supporters. The model predicts extensive use of patron- age, ethnic bias in taxation and spending patterns and unveils a new mechanism through which economic frictions translate into increased rent extraction by the leader. These predictions are consistent with the experiences of bad governance, ethnic bias, wasteful policies and kleptocracy in post-colonial Africa.