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On the looting of nations

  • Mare Sarr


  • Erwin Bulte


  • Chris Meissner


  • Tim Swanson


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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Article provided by Springer in its journal Public Choice.

Volume (Year): 148 (2011)
Issue (Month): 3 (September)
Pages: 353-380

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Handle: RePEc:kap:pubcho:v:148:y:2011:i:3:p:353-380
DOI: 10.1007/s11127-010-9659-9
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