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Democracy and the curse of natural resources

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Abstract

We propose a theoretical model to explain empirical regularities related to the curse of natural resources. This is an explicitly political model which emphasizes the behavior and incentives of politicians. We extend the standard voting model to give voters political control beyond the elections. This gives rise to a new restriction into our political economy model: policies should not give rise to a revolution. Our model clarifies when resource discoveries might lead to revolutions, namely, in countries with weak institutions. Natural resources may be bad for democracy by harming political turnover. Our model also suggests a non-linear dependence of human capital on natural resources. For low levels of democracy human capital depends negatively on natural resources, while for high levels of democracy the dependence is reversed. This theoretical finding is corroborated in both cross section and panel data regressions.

Suggested Citation

  • Esther Hauk & Antonio Cabrales, 2007. "Democracy and the curse of natural resources," UFAE and IAE Working Papers 709.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 30 Mar 2009.
  • Handle: RePEc:aub:autbar:709.07
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    1. S. Guriev & G. Egorov & K. Sonin., 2007. "Media Freedom, Bureaucratic Incentives, and the Resource Curse," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
    2. Simeon Djankov & Jose Montalvo & Marta Reynal-Querol, 2008. "The curse of aid," Journal of Economic Growth, Springer, vol. 13(3), pages 169-194, September.
    3. Olsson, Ola, 2007. "Conflict diamonds," Journal of Development Economics, Elsevier, vol. 82(2), pages 267-286, March.
    4. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
    5. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
    6. Teresa Garcia-Milà & Albert Marcet & Eva Ventura, 2010. "Supply Side Interventions and Redistribution," Economic Journal, Royal Economic Society, vol. 120(543), pages 105-130, March.
    7. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, May.
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    Cited by:

    1. Cervellati Matteo & Fortunato Piergiuseppe & Sunde Uwe, 2012. "Consensual and Conflictual Democratization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-51, December.

    More about this item

    Keywords

    Curse of natural resources; democracy; political game; revolution; human capital.;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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