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Democracy and the curse of natural resources

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  • Antonio Cabrales

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  • Esther Hauk

    ()

Abstract

We propose a theoretical model to explain empirical regularities related to the curse of natural resources. This is an explicitly political model which emphasizes the behavior and incentives of politicians. We extend the standard voting model to give voters political control beyond the elections. This gives rise to a new restriction into our political economy model: policies should not give rise to a revolution. Our model clarifies when resource discoveries might lead to revolutions, namely, in countries with weak institutions. Natural resources may be bad for democracy by harming political turnover. Our model also suggests a non-linear dependence of human capital on natural resources. For low levels of democracy human capital depends negatively on natural resources, while for high levels of democracy the dependence is reversed. This theoretical finding is corroborated in both cross section and panel data regressions.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we075429.

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Date of creation: Jun 2007
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Handle: RePEc:cte:werepe:we075429

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  1. Egorov, Georgy & Guriev, Sergei & Sonin, Konstantin, 2006. "Media Freedom, Bureaucratic Incentives and the Resource Curse," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5748, C.E.P.R. Discussion Papers.
  2. Teresa Garcia-Milà & Albert Marcet & Eva Ventura, 2010. "Supply Side Interventions and Redistribution," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 120(543), pages 105-130, 03.
  3. Gylfason, Thorvaldur, 2000. "Natural Resources, Education, and Economic Development," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2594, C.E.P.R. Discussion Papers.
  4. Simeon Djankov & Jose Montalvo & Marta Reynal-Querol, 2008. "The curse of aid," Journal of Economic Growth, Springer, Springer, vol. 13(3), pages 169-194, September.
  5. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  6. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (Bace) Approach," OECD Economics Department Working Papers 266, OECD Publishing.
  7. Olsson, Ola, 2007. "Conflict diamonds," Journal of Development Economics, Elsevier, Elsevier, vol. 82(2), pages 267-286, March.
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