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Resource Windfalls, Political Regimes, and Political Stability

Author

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  • Francesco Caselli
  • Andrea Tesei

Abstract

We study theoretically and empirically whether natural resource windfalls affect political regimes. We document the following regularities. Natural resource windfalls have no effect on the political system when they occur in democracies. However, windfalls have significant political consequences in autocracies. In particular, when an autocratic country receives a positive shock to its flow of resource rents it responds by becoming even more autocratic. Furthermore, there is heterogeneity in the response of autocracies. In deeply entrenched autocracies the effect of windfalls on politics is virtually nil, while in moderately entrenched autocracies windfalls significantly exacerbate the autocratic nature of the political system. To frame the empirical work we present a simple model in which political incumbents choose the degree of political contestability by deciding how much to spend on vote-buying, bullying, or outright repression. Potential challengers decide whether or not to try to unseat the incumbent and replace him. The model uncovers a reason for the asymmetric impact of resource windfalls on democracies and autocracies, as well as the differential impact within autocratic regimes.

Suggested Citation

  • Francesco Caselli & Andrea Tesei, 2011. "Resource Windfalls, Political Regimes, and Political Stability," CEP Discussion Papers dp1091, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1091
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    References listed on IDEAS

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    Cited by:

    1. BenYishay, Ariel & Grosjean, Pauline, 2014. "Initial endowments and economic reform in 27 post-socialist countries," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 892-906.
    2. Kris James Mitchener & Gonçalo Pina, 2016. "Pegxit Pressure: Evidence from the Classical Gold Standard," NBER Working Papers 22844, National Bureau of Economic Research, Inc.
    3. Cervellati, Matteo & Esposito, Elena & Sunde, Uwe & Valmori, Simona, 2016. "Malaria Risk and Civil Violence," CEPR Discussion Papers 11496, C.E.P.R. Discussion Papers.
    4. Agüero, Jorge M. & Balcázar, Carlos Felipe & Maldonado, Stanislao & Ñopo, Hugo, 2017. "The value of redistribution: natural resources and the formation of human capital under weak institutions," Avances de Investigación 0028, Grupo de Análisis para el Desarrollo (GRADE).
    5. Markus Brückner & Antonio Ciccone & Andrea Tesei, 2012. "Oil Price Shocks, Income, and Democracy," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 389-399, May.
    6. Jørgen Juel Andersen & Frode Martin Nordvik & Andrea Tesei, 2017. "Oil and Civil Conflict: On and Off (Shore)," Working Papers No 1/2017, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    7. Chris Bidner & Patrick Francois & Francesco Trebbi, 2014. "A Theory of Minimalist Democracy," NBER Working Papers 20552, National Bureau of Economic Research, Inc.
    8. Ahmed S. Mahmud & Giacomo De Luca & Juan F. Vargas, 2012. "The politics of resource booms," DOCUMENTOS DE TRABAJO 010082, UNIVERSIDAD DEL ROSARIO.
    9. Vusal Musayev, 2016. "Externalities in Military Spending and Growth: The Role of Natural Resources as a Channel through Conflict," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(3), pages 378-391, June.
    10. Musayev, Vusal, 2014. "Commodity Price Shocks, Conflict and Growth: The Role of Institutional Quality and Political Violence," MPRA Paper 59786, University Library of Munich, Germany.
    11. James Cust, 2017. "The role of governance and international norms in managing natural resources," WIDER Working Paper Series 203, World Institute for Development Economic Research (UNU-WIDER).
    12. Stephan E. Maurer, 2018. "Oil Discoveries and Education Spending in the Postbellum South," CEP Discussion Papers dp1526, Centre for Economic Performance, LSE.
    13. Burke Paul J., 2012. "Economic Growth and Political Survival," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-43.
    14. Tiago Cavalcanti & Daniel Da Mata & Frederik Toscani, 2014. "Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth," Cambridge Working Papers in Economics 1455, Faculty of Economics, University of Cambridge.
    15. Antonakakis, Nikolaos & Cunado, Juncal & Filis, George & Perez de Gracia, Fernando, 2015. "The Resource Curse Hypothesis Revisited: Evidence from a Panel VAR," MPRA Paper 72085, University Library of Munich, Germany.
    16. Michael Dorsch & Karl Dunz & Paul Maarek, 2015. "Macro shocks and costly political action in non-democracies," Public Choice, Springer, vol. 162(3), pages 381-404, March.
    17. Fuchs-Schündeln, N. & Hassan, T.A., 2016. "Natural Experiments in Macroeconomics," Handbook of Macroeconomics, Elsevier.
    18. 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.
    19. Pierre PECHER, 2013. "Ethnic conflict, power dynamics and growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    20. Faizal Z. Ahmed & Eric Werker, 2012. "Unobserved State Fragility and the Political Transfer Problem," Harvard Business School Working Papers 13-009, Harvard Business School.
    21. Guerriero, Carmine & Boranbay, Serra, 2012. "Endogenous (In)Formal Institutions," MPRA Paper 71028, University Library of Munich, Germany, revised 22 Apr 2016.
    22. Carreri, Maria & Dube, Oeindrila, 2016. "Do Natural Resources Influence Who Comes to Power, and How?," CEPR Discussion Papers 11136, C.E.P.R. Discussion Papers.
    23. Smith, Brock, 2015. "The resource curse exorcised: Evidence from a panel of countries," Journal of Development Economics, Elsevier, vol. 116(C), pages 57-73.
    24. repec:cup:jinsec:v:13:y:2017:i:02:p:401-420_00 is not listed on IDEAS
    25. Brückner, Markus & Gradstein, Mark, 2012. "Income Growth and Institutional Quality: Evidence from International Oil Price Shocks," CEPR Discussion Papers 8871, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    natural resources; elections; political accountability;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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