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Resource Abundance, Political Corruption, and Instability of Democracy

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  • Polterovich, Victor
  • Popov, Vladimir
  • Tonis, Alexander

Abstract

In this paper we analyze data on sustainability of democratic regimes in resource rich countries and suggest a model to explain why resource abundance may lead to instability of democracy in some countries, but does not create any difficulties for a democratic system in other ones. Rate of resource rent tax is considered as the only policy instrument in our simple model. The tax affects the income of a representative voter. Choosing a tax rate, Autocrat competes with conventional Politician (a representative political party) for the office. Our model demonstrates the existence of a threshold for propensity to corruption (a measure of the institutional quality). The probability of the democracy preservation is decreasing in the amount of resources if the propensity is high and is independent of resources or even grows with the amount of resources if the propensity is low. It is shown also that Autocrat may use two types of policies depending on the qualities of governance (abilities to allocate tax revenues without big losses) that the public assigns to her and to Politician. More efficient Autocrat is inclined to follow populist high tax policy whereas lower Autocrat’s efficiency results in pro-Oligarch low tax policy when the country is resource abundant.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19154.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:19154

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Keywords: Democracy; resource abundance; corruption;

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References

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  1. James A. Robinson & Ragnar Torvik & Thierry Verdier, 2003. "Politcal Foundations of the Resource Curse," DELTA Working Papers, DELTA (Ecole normale supérieure) 2003-33, DELTA (Ecole normale supérieure).
  2. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," Economics Working Papers, Institute for Advanced Study, School of Social Science 0047, Institute for Advanced Study, School of Social Science.
  3. Brunnschweiler, Christa N., 2008. "Cursing the Blessings? Natural Resource Abundance, Institutions, and Economic Growth," World Development, Elsevier, Elsevier, vol. 36(3), pages 399-419, March.
  4. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 116(508), pages 1-20, 01.
  5. 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.
  6. Jean-Philippe Stijns, 2001. "Natural Resource Abundance And Economic Growth Revisited," Development and Comp Systems 0103001, EconWPA.
  7. Rodriguez, Francisco & Sachs, Jeffrey D, 1999. " Why Do Resource-Abundant Economies Grow More Slowly?," Journal of Economic Growth, Springer, Springer, vol. 4(3), pages 277-303, September.
  8. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
  9. Carlos Leite & Jens Weidmann, 1999. "Does Mother Nature Corrupt," IMF Working Papers 99/85, International Monetary Fund.
  10. Daron Acemoglu & James A. Robinson & Thierry Verdier, 2003. "Kleptocracy and Divide-and-Rule: A Model of Personal Rule," NBER Working Papers 10136, National Bureau of Economic Research, Inc.
  11. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, Elsevier, vol. 67(2), pages 455-470, April.
  12. Clague, Christopher, et al, 1996. " Property and Contract Rights in Autocracies and Democracies," Journal of Economic Growth, Springer, Springer, vol. 1(2), pages 243-76, June.
  13. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, Elsevier, vol. 59(1), pages 43-76, June.
  14. Clague, Christopher & Keefer, Philip & Knack, Stephen & Olson, Mancur, 1996. "Property and Contract Rights in Autocracies and Democracies," MPRA Paper 25720, University Library of Munich, Germany.
  15. Polterovich, Victor & Popov, Vladimir, 2007. "Democratization, Quality of Institutions and Economic Growth," MPRA Paper 19152, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Popov, Vladimir, 2009. "Lessons from the Transition Economies: Putting the Success Stories of the Postcommunist World into a Broader Perspective," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Popov, Vladimir, 2010. "The Long Road to Normalcy," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  3. Polterovich, Victor & Popov, Vladimir & Tonis, Alexander, 2009. "Концентрация Доходов, Нестабильность Демократии И Экономический Рост
    [Income Concentration, Instability of Democracy and the Economic Gr
    ," MPRA Paper 27561, University Library of Munich, Germany.
  4. Vladimir Popov, 2009. "Why the West Became Rich before China and Why China Has Been Catching Up with the West since 1949: nother Explanation of the “Great Divergence” and “Great Convergence” Stories," Working Papers w0132, Center for Economic and Financial Research (CEFIR).
  5. Polterovich, Victor & Popov, Vladimir, 2007. "Демократизация И Экономический Рост
    [Democratization and Economic Growth]
    ," MPRA Paper 23012, University Library of Munich, Germany.
  6. Polterovich, Victor & Popov, Vladimir, 2007. "Democratization, Quality of Institutions and Economic Growth," MPRA Paper 19152, University Library of Munich, Germany.
  7. Popov, Vladimir, 2010. "Development theories and development experience: half a century journey," MPRA Paper 28111, University Library of Munich, Germany.

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