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Resource Windfalls, Political Regimes, and Political Stability

  • Caselli, Francesco
  • Tesei, Andrea

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8662.

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Date of creation: Nov 2011
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Handle: RePEc:cpr:ceprdp:8662
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  1. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
  2. Paul J. Burke & Andrew Leigh, 2010. "Do Output Contractions Trigger Democratic Change?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 124-57, October.
  3. Francesco Caselli & Wilbur John Coleman II, 2013. "On The Theory Of Ethnic Conflict," Journal of the European Economic Association, European Economic Association, vol. 11, pages 161-192, 01.
  4. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S158-S183, December.
  5. Markus Brückner, 2010. "Rain and the Democratic Window of Opportunity," 2010 Meeting Papers 224, Society for Economic Dynamics.
  6. Kevin K. Tsui, 2011. "More Oil, Less Democracy: Evidence from Worldwide Crude Oil Discoveries," Economic Journal, Royal Economic Society, vol. 121(551), pages 89-115, March.
  7. Francesco Caselli & Guy Michaels, 2013. "Do Oil Windfalls Improve Living Standards? Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 208-38, January.
  8. Antonio Ciccone, 2011. "Estimating the effect of transitory economic shocks on civil conflict," Economics Working Papers 1063, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April.
  10. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  11. Marcus Brückner & Antonio Ciccone & Andrea Tesei, 2011. "Oil price shocks, income and democracy," Economics Working Papers 1351, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Dalgaard, Carl-Johan & Olsson, Ola, 2006. "Windfall Gains, Political Economy, and Economic Development," Working Papers in Economics 223, University of Gothenburg, Department of Economics.
  13. Michael Alexeev & Robert Conrad, 2009. "The Elusive Curse of Oil," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 586-598, August.
  14. David I. Harvey & Neil M. Kellard & Jakob B. Madsen & Mark E. Wohar, 2010. "The Prebisch-Singer Hypothesis: Four Centuries of Evidence," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 367-377, May.
  15. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  16. Timothy Besley & Masayuki Kudamatsu, 2006. "Health and Democracy," American Economic Review, American Economic Association, vol. 96(2), pages 313-318, May.
  17. Jonathan Isham & Michael Woolcock & Lant Pritchett & Gwen Busby, 2005. "The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth," World Bank Economic Review, World Bank Group, vol. 19(2), pages 141-174.
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