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On the looting of nations

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  • Mare Sarr

    ()

  • Erwin Bulte

    ()

  • Chris Meissner

    ()

  • Tim Swanson

    ()

Abstract

We develop a dynamic discrete choice model of an unchecked ruler making decisions regarding the development of a resource-rich country. Resources serve as collateral and facilitate the acquisition of loans. The ruler chooses either to stay in power while facing the risk of being ousted, or loot the country’s riches by liquefying the resources through lending. We show that unstructured lending from international credit markets can create incentives to loot the country; and an enhanced likelihood of looting causes greater political instability, and diminishes growth. Using a treatment effects model, we find strong evidence that supports our predictions.
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Suggested Citation

  • Mare Sarr & Erwin Bulte & Chris Meissner & Tim Swanson, 2011. "On the looting of nations," Public Choice, Springer, vol. 148(3), pages 353-380, September.
  • Handle: RePEc:kap:pubcho:v:148:y:2011:i:3:p:353-380
    DOI: 10.1007/s11127-010-9659-9
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    Citations

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    Cited by:

    1. Mare Sarr & Timothy Swanson, 2012. "Corruption and the Curse: The Dictator's choice," CIES Research Paper series 17-2012, Centre for International Environmental Studies, The Graduate Institute.
    2. Mare Sarr & Chiara Ravetti & Tim Swanson, 2015. "Why Give Aid to Resource-Rich Autocrats?," CIES Research Paper series 39-2015, Centre for International Environmental Studies, The Graduate Institute.
    3. Kasekende, Elizabeth & Abuka, Charles & Sarr, Mare, 2016. "Extractive industries and corruption: Investigating the effectiveness of EITI as a scrutiny mechanism," Resources Policy, Elsevier, vol. 48(C), pages 117-128.
    4. Elizabeth Kasekende & Charles Abuka & Marr Sar, 2016. "Extractive Industries and Corruption: Investigating the Effectiveness of the EITI as a Scrutiny Mechanism," Research Papers RP_326, African Economic Research Consortium.
    5. Karolina Ryszka, 2013. "Resource Extraction in a Political Economy Framework," Tinbergen Institute Discussion Papers 13-094/VIII, Tinbergen Institute.
    6. Mare Sarr & Timothy Swanson & Chiara Ravetti & Siri Wingaard, 2012. "Aiding and Abetting the Looting of Nations: The impact of Aid on growth in Autocracies," CIES Research Paper series 15-2012, Centre for International Environmental Studies, The Graduate Institute.
    7. Brock Smith, 2016. "The Resource Curse Exorcised: Evidence from a Panel of Countries," OxCarre Working Papers 165, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    8. Dauvin, Magali & Guerreiro, David, 2017. "The Paradox of Plenty: A Meta-Analysis," World Development, Elsevier, vol. 94(C), pages 212-231.
    9. repec:ldr:wpaper:95 is not listed on IDEAS
    10. Meissner, Christopher M., 2014. "Growth from Globalization? A View from the Very Long Run," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 8, pages 1033-1069 Elsevier.
    11. Smith, Brock, 2015. "The resource curse exorcised: Evidence from a panel of countries," Journal of Development Economics, Elsevier, vol. 116(C), pages 57-73.

    More about this item

    Keywords

    Natural resource curse; Economic growth; Dictatorship; Looting; Odious debt; O11; O13; O16;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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