We study a model of the rise and fall of illiberal democracies. Voters value both liberty and economic security. In times of crisis, voters may prefer to elect an illiberal government that, by violating constitutional constraints, offers greater economic security but less liberty. However, violating these constraints allows the government to manipulate information, in turn reducing electoral accountability. We show how elements of liberal constitutions induce voters to elect illiberal governments that remain in power for inefficiently long—including forever. We derive insights into what makes constitutions stable against the rise of illiberal governments. We extend the model to allow for illiberal governments to overcome checks and balances and become autocracies. We show that stronger checks and balances are a double-edged sword: they slow down autocratization but may make it more likely. We discuss the empirical relevance of our theoretical framework and its connection to real world examples.

Sender, who is either good or bad, wishes to look good at an exogenous deadline. Sender privately observes if and when she can release a public flow of information about her private type. Releasing information earlier exposes to greater scrutiny, but signals credibility. In equilibrium bad Sender releases information later than good Sender. We find empirical support for the dynamic predictions of our model using data on the timing of U.S. presidential scandals and U.S. initial public offerings. In the context of elections, our results suggest that October Surprises are driven by the strategic behaviour of bad Sender.

With inefficient bureaucratic institutions, the effects of laws are hard to assess and incompetent politicians may pass laws to build a reputation as skillful reformers. Since too many laws curtail bureaucratic efficiency, this mechanism can generate a steady state with Kafkaesque bureaucracy. Temporary surges in political instability heighten the incentives to overproduce laws and can shift the economy towards the Kafkaesque state. Consistent with the theory, after a surge in political instability in the early 1990s, Italy experienced a significant increase in the amount of poor-quality legislation and a decrease in bureaucratic efficiency. (JEL D72, D73)