Authoritarian regimes often use targeted social control—unequal application of the law to limit expressive freedom and enforce social conformity. At the same time, their methods appear less draconian than in the past. In this model, an authority structures punishments and rewards to compel adherence to its preferred norm. The authority’s commitment is time-limited and depends on imperfectly informative signals of a citizen’s behaviour. Given two citizens with the same observed behaviour, the authority imposes harsher punishments on the poorer and/or ex ante dissident individual. Lighter punishments are imposed on the wealthier citizen to prevent “over-compliance”. Wealth inequality increases over time. Some citizens become prosperous “lackeys” while others become destitute from confiscation. In stable regimes with high state capacity, the authority reduces punishments and/or increases rewards to allow citizens to accumulate wealth, leading to social conformity and balanced growth in the long run. In unstable regimes with low capacity, the citizenry splits into groups of wealthy lackeys and destitute proles.

This paper considers a dynamic model of Tiebout-like migration between communities that utilize distinct allocation procedures for public goods. At issue is whether voluntary or compulsory procedures are more likely to prevail over time. We model infinitely lived individuals who make repeated, sequential location decisions over one of two communities. Each community uses a distinct mechanism for allocating public goods. The first is one in which contributions are given voluntarily by the citizenry of the community. The second is a compulsory scheme by which individuals are taxed proportionately to wealth with the tax determined by a majority vote. Opportunities to accumulate wealth exist via accumulation of public capital. The Markov Perfect equilibria of the dynamic game are studied. Our main result shows that when accumulated wealth converges to a steady state, individuals' locational choices eventually “select” the involuntary provision mechanism. This holds despite the fact that unanimous location in the voluntary provision community may in many cases remain as a Nash equilibrium of the static game each period. We also describe conditions under which voluntary provision survives. These conditions require that accumulation of capital fails to decrease wealth dispersion over time. The results are shown to be consistent with findings relating inequality to school choice.