Economists often assume government as a third-party agent, and is responsible for maintaining an efficient market under fair regulation. This neglects the fact that politicians are indeed not interested in achieving the possible best market outcome, but desperately trying to find ways to secure office. Selectorate theory is an attempt to explain these political behaviours and consequences with well-established economic models.
The fundamental concept in Selectorate theory is that the official is maximising their chance to stay elected. There are mainly two groups of people who influence the politician: 1. The Real Selectorate, who are the registered voters that are able to cast their votes; 2. The winning coalition, who are the people from the Selectorate giving victory to the politician. In a majoritarian democratic election, it is widely believed the ratio of winning coalition to selectorate should be greater than 50%. However in an authoritarian regime, it is observed that the ratio usually stays low because only a few powerful can determine the leader.
According to the theory, it states that democracies are more likely to provide public goods for a large number of winning coalition, since pleasing all winning coalition members will be less costly through improving public facilities and services. Monopoly behaviour will be restricted, as the market tends to be inclusive, featuring well-defined private property rights, more equal income distribution and high empowerment of individuals.
On the other hand, under a small winning coalition system, authoritarians are encouraged to give out private goods to the few powerful people while ignoring the rest of the population. Monopolies are welcome by the dictators when they can help politicians to extract rent from members of society. The system is an extractive one because the market is shaped up in the way to keep wealthy elites in power. The institutions and economic development are not sustainable.
In additional to the two extremes, in some transition or illiberal-democratic countries, it is often true that leaders will expand public goods provision to bribe the selectorates. The notion is that the public resources are large enough to satisfy the economics needs of selectorate. Should they revolt or ask for a larger winning coalition the resources will be lost. It is very costly for individuals to give up their economics goods in exchange for political goods. Hence market remains a certain extent of exclusiveness and leaders usually succeed in remaining in power for a long time.
The complicated case
In a lot of transition regimes, short-sighted individuals, enjoying a high level of economics goods, do not see the long-term redistributed profit in political change. According to the above, in the short run, political good and economic good can be a trade-off. Wealthy centralised government usually proposes disincentives on people to ask for a more democratic system to slow down the transition. However, we have seen how a large winning coalition system can eliminate extractive institutions while sustaining inclusive institutions. The benefit of democratisation must be realised and accounted into real economics value. This must be promoted by the democrats in order to push forward their campaigns. The message should be sound and clear: Every individual in the society can truly enjoy the benefit of a free market system in a democratic system. You pick your leader, he protects your system.
*For further reference please read The Logic of Political Survival by Bruce Bueno de Mesquita and Why Nations Fail by Daron Acemoglu