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Resource Windfalls, Political Regimes, and Political Stability

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  • Francesco Caselli
  • Andrea Tesei

Abstract

We study theoretically and empirically whether natural resource windfalls affect political regimes. We document the following regularities. Natural resource windfalls have no effect on the political system when they occur in democracies. However, windfalls have significant political consequences in autocracies. In particular, when an autocratic country receives a positive shock to its flow of resource rents it responds by becoming even more autocratic. Furthermore, there is heterogeneity in the response of autocracies. In deeply entrenched autocracies the effect of windfalls on politics is virtually nil, while in moderately entrenched autocracies windfalls significantly exacerbate the autocratic nature of the political system. To frame the empirical work we present a simple model in which political incumbents choose the degree of political contestability by deciding how much to spend on vote-buying, bullying, or outright repression. Potential challengers decide whether or not to try to unseat the incumbent and replace him. The model uncovers a reason for the asymmetric impact of resource windfalls on democracies and autocracies, as well as the differential impact within autocratic regimes.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17601.

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Date of creation: Nov 2011
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Handle: RePEc:nbr:nberwo:17601

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  1. Markus Bruckner & Antonio Ciccone & Andrea Tesei, 2011. "Oil Price Shocks, Income, and Democracy," School of Economics Working Papers 2011-11, University of Adelaide, School of Economics.
  2. Xavier Sala-i-Martín & Arvind Subramanian, 2003. "Addressing the natural resource curse: An illustration from Nigeria," Economics Working Papers 685, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Brückner, Markus & Ciccone, Antonio, 2008. "Rain and the Democratic Window of Opportunity," CEPR Discussion Papers 6691, C.E.P.R. Discussion Papers.
  4. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S158-S183, December.
  5. Paul J. Burke & Andrew Leigh, 2010. "Do Output Contractions Trigger Democratic Change?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 124-57, October.
  6. Francesco Caselli & Guy Michaels, 2009. "Do Oil Windfalls Improve Living Standards? Evidence from Brazil," NBER Working Papers 15550, National Bureau of Economic Research, Inc.
  7. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  8. Antonio Ciccone, 2011. "Estimating the effect of transitory economic shocks on civil conflict," Economics Working Papers 1063, Department of Economics and Business, Universitat Pompeu Fabra.
  9. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  10. Carl-Johan Dalgaard & Ola Olsson, 0. "Windfall Gains, Political Economy and Economic Development," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 17(suppl_1), pages -109.
  11. Kevin K. Tsui, 2011. "More Oil, Less Democracy: Evidence from Worldwide Crude Oil Discoveries," Economic Journal, Royal Economic Society, vol. 121(551), pages 89-115, March.
  12. Jonathan Isham & Michael Woolcock & Lant Pritchett & Gwen Busby, 2005. "The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth," World Bank Economic Review, World Bank Group, vol. 19(2), pages 141-174.
  13. Michael Alexeev & Robert Conrad, 2009. "The Elusive Curse of Oil," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 586-598, August.
  14. David I. Harvey & Neil M. Kellard & Jakob B. Madsen & Mark E. Wohar, 2010. "The Prebisch-Singer Hypothesis: Four Centuries of Evidence," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 367-377, May.
  15. Timothy Besley & Masayuki Kudamatsu, 2006. "Health and Democracy," American Economic Review, American Economic Association, vol. 96(2), pages 313-318, May.
  16. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April.
  17. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse," IMF Working Papers 03/139, International Monetary Fund.
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Cited by:
  1. Markus Bruckner & Antonio Ciccone & Andrea Tesei, 2011. "Oil Price Shocks, Income, and Democracy," School of Economics Working Papers 2011-11, University of Adelaide, School of Economics.
  2. Pierre PECHER, 2013. "Ethnic conflict, power dynamics and growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  3. Faizal Z. Ahmed & Eric Werker, 2012. "Unobserved State Fragility and the Political Transfer Problem," Harvard Business School Working Papers 13-009, Harvard Business School.
  4. Ahmed S. Mahmud & Giacomo De Luca & Juan F. Vargas, 2012. "The politics of resource booms," DOCUMENTOS DE TRABAJO 010082, UNIVERSIDAD DEL ROSARIO.

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