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Petro populism

Author

Listed:
  • Matsen, Egil
  • Natvik, Gisle J.
  • Torvik, Ragnar

Abstract

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.

Suggested Citation

  • Matsen, Egil & Natvik, Gisle J. & Torvik, Ragnar, 2016. "Petro populism," Journal of Development Economics, Elsevier, vol. 118(C), pages 1-12.
  • Handle: RePEc:eee:deveco:v:118:y:2016:i:c:p:1-12
    DOI: 10.1016/j.jdeveco.2015.08.010
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    File URL: http://www.sciencedirect.com/science/article/pii/S0304387815001017
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    Other versions of this item:

    • Egil Matsen & Ragnar Torvik & Gisle J. Natvik, 2012. "Petro populism," Working Paper Series 12812, Department of Economics, Norwegian University of Science and Technology.
    • Egil Matsen & Gisle J. Natvik & Ragnar Torvik, 2014. "Petro Populism," Working Papers No 1/2014, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    • Egil Matsen & Gisle J. Natvik & Ragnar Torvik, 2012. "Petro populism," Working Paper 2012/06, Norges Bank.

    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ahmed Mahmud & Syed Basher, 2014. "Price volatility and the political economy of resource-rich nations," Economics of Governance, Springer, vol. 15(3), pages 253-279, August.
    2. repec:eee:ecanpo:v:55:y:2017:i:c:p:179-193 is not listed on IDEAS
    3. Tania Masi & Roberto Ricciuti, 2016. "Oil discoveries and democracy," WIDER Working Paper Series 057, World Institute for Development Economic Research (UNU-WIDER).
    4. Iacono, Roberto, 2017. "A comparison of fiscal rules for resource-rich economies," Economic Analysis and Policy, Elsevier, vol. 55(C), pages 179-193.

    More about this item

    Keywords

    Resource curse; Political economy;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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