Democracy and the curse of natural resources
AbstractWe 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 cross section regressions.
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Bibliographic InfoPaper provided by FEDEA in its series Working Papers with number 2009-07.
Date of creation: Feb 2009
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Other versions of this item:
- Antonio Cabrales & Esther Hauk, 2007. "Democracy and the curse of natural resources," Working Papers 317, Barcelona Graduate School of Economics.
- Esther Hauk & Antonio Cabrales, 2007. "Democracy and the curse of natural resources," UFAE and IAE Working Papers 709.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 30 Mar 2009.
- Antonio Cabrales & Esther Hauk, 2007. "Democracy and the curse of natural resources," Economics Working Papers we075429, Universidad Carlos III, Departamento de EconomÃa.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-22 (All new papers)
- NEP-CDM-2009-02-22 (Collective Decision-Making)
- NEP-ENE-2009-02-22 (Energy Economics)
- NEP-ENV-2009-02-22 (Environmental Economics)
- NEP-POL-2009-02-22 (Positive Political Economics)
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