Petro populism

We aim to explain petro populism — the excessive use of oil revenues to buy political support. To reap the full gains of natural resource income, politicians need to remain in office over time. Hence, even a rent-seeking incumbent who prioritizes his own welfare above that of citizens, will want to provide voters with goods and services if it promotes his probability of remaining in office. While this incentive benefits citizens under the rule of rent-seekers, it adversely motivates benevolent policymakers to short-term overprovision of goods and services. In equilibrium, politicians of all types indulge in excessive resource extraction, while voters reward policies they realize cannot be sustained over time. Moreover, overextraction might even be reinforced as voters become better informed.