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Oil, Coffee and the Dynamic Commons Problems in Colombia

  • Mauricio Cardenas
  • Zeinab Partow

The dynamic commons problem arises when different groups in society engage in intense redistributive activity as a result of an export boom. This paper analyzes the role that institutions play in ameliorating that problem in the case of coffee and oil in Colombia. The paper presents a model that rationalizes the existence of a federation of coffee producers that effectively reduces inefficient redistribution to other sectors of society. According to the empirical evidence we find that domestic coffee prices have been unaffected by political factors, so that in practice appropriation of coffee rents does not depend on electoral and partisan cycles. The case of oil is substantially different. Here, rents are claimed by a large number of divided agents. According to the model, one feasible solution to the dynamic commons problem when the fiscal structure is not unitary is to impose a set of rules that restrict appropriations by different groups during windfalls. The major cost of this solution, embodied in the Oil Stabilization Fund, is the total loss of flexibility.

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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 3033.

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Date of creation: Aug 1998
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Handle: RePEc:idb:wpaper:3033
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  1. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December.
  2. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  3. Bevan, D L & Collier, P & Gunning, J W, 1989. "Fiscal Response to a Temporary Trade Shock: The Aftermath of the Kenyan Coffee Boom," World Bank Economic Review, World Bank Group, vol. 3(3), pages 359-78, September.
  4. Masao Ogaki & Jonathan D. Ostry & Carmen M. Reinhart, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 38-71, March.
  5. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
  6. Cardenas, Mauricio, 1994. "Stabilization and redistribution of coffee revenues: A political economy model of commodity marketing boards," Journal of Development Economics, Elsevier, vol. 44(2), pages 351-380, August.
  7. Alesina, Alberto, 1988. "Credibility and Policy Convergence in a Two-Party System with Rational Voters," American Economic Review, American Economic Association, vol. 78(4), pages 796-805, September.
  8. Roberto Junguito B., 1996. "The Management Of Coffee: Bonanzas And Crisis: Political Economy Issues," BORRADORES DE ECONOMIA 003611, BANCO DE LA REPÚBLICA.
  9. Robert H. Bates, 1998. "Open-Economy Politics: The Political Economy of the World Coffee Trade," Economics Books, Princeton University Press, edition 1, volume 1, number 6067, April.
  10. Lane, Philip R & Tornell, Aaron, 1996. " Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
  11. Levy, Brian & Spiller, Pablo T, 1994. "The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 201-46, October.
  12. Sachs, Jeffrey & Alesina, Alberto, 1988. "Political Parties and the Business Cycle in the United States, 1948-1984," Scholarly Articles 4553026, Harvard University Department of Economics.
  13. Bevan, D L & Collier, P & Gunning, J W, 1987. "Consequences of a Commodity Boom in a Controlled Economy: Accumulation and Redistribution in Kenya 1975-83," World Bank Economic Review, World Bank Group, vol. 1(3), pages 489-513, May.
  14. Roberto Junguito, 1996. "The management of coffee bonanzas and crisis: political economy issues," BORRADORES DE ECONOMIA 003610, BANCO DE LA REPÚBLICA.
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