A dynamic model of the interaction between the state and the private sector

The main characteristic of the micro model developed in this paper is the endogenous behaviour of the state. The state is treated as an organization in its own right, made up of politicians and bureaucrats. Its behaviour is related to the interests of these agents and their relative power within the state organization. The economic consequenses of this interest representation by the state, and the impact of structural coercion (constraints), originating from the private sector, on these consequences, are our main concern. A particular feature of the model is that it allows for the fact that technology may be dependent on the state's activities.