Fire in Cairo: Authoritarian-redistributive social contracts, structural change and the Arab spring

In this paper, we argue that the Arab spring can be understood as a violent criticism of and attack against the post-Independence social contract that prevailed in most Middle East and North African countries. We show that this social contract, characterized by the combination of high levels of redistribution and low political accountability and social inclusiveness may well explain (1) the slow pace of structural change relative to the rest of the world and (2) the specific political economy that have triggered social discontent among the young, and broad cohorts of educated workers, and eventually thrown populations onto the streets. More specifically, it is shown that authoritarianism reduces the positive effect of redistribution on structural change, with this adverse effect being even larger when the likely endogeneity of the social contract to the export structure is controlled for. We also describe the specific political economy that was conducive to the low democracy-low diversification equilibrium featured by most Arab economies.