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Resource Abundance, Political Corruption, and Instability of Democracy

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Listed:
  • Polterovich, Victor
  • Popov, Vladimir
  • Tonis, Alexander

Abstract

In this paper we analyze data on sustainability of democratic regimes in resource rich countries and suggest a model to explain why resource abundance may lead to instability of democracy in some countries, but does not create any difficulties for a democratic system in other ones. Rate of resource rent tax is considered as the only policy instrument in our simple model. The tax affects the income of a representative voter. Choosing a tax rate, Autocrat competes with conventional Politician (a representative political party) for the office. Our model demonstrates the existence of a threshold for propensity to corruption (a measure of the institutional quality). The probability of the democracy preservation is decreasing in the amount of resources if the propensity is high and is independent of resources or even grows with the amount of resources if the propensity is low. It is shown also that Autocrat may use two types of policies depending on the qualities of governance (abilities to allocate tax revenues without big losses) that the public assigns to her and to Politician. More efficient Autocrat is inclined to follow populist high tax policy whereas lower Autocrat’s efficiency results in pro-Oligarch low tax policy when the country is resource abundant.

Suggested Citation

  • Polterovich, Victor & Popov, Vladimir & Tonis, Alexander, 2007. "Resource Abundance, Political Corruption, and Instability of Democracy," MPRA Paper 19154, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:19154
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    File URL: https://mpra.ub.uni-muenchen.de/19154/1/MPRA_paper_19154.pdf
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    References listed on IDEAS

    as
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    3. Polterovich, Victor & Popov, Vladimir, 2007. "Democratization, Quality of Institutions and Economic Growth," MPRA Paper 19152, University Library of Munich, Germany.
    4. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1301-1338.
    5. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
    6. Brunnschweiler, Christa N., 2008. "Cursing the Blessings? Natural Resource Abundance, Institutions, and Economic Growth," World Development, Elsevier, vol. 36(3), pages 399-419, March.
    7. Clague, Christopher & Keefer, Philip & Knack, Stephen & Olson, Mancur, 1996. "Property and Contract Rights in Autocracies and Democracies," Journal of Economic Growth, Springer, vol. 1(2), pages 243-276, June.
    8. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June.
    9. Robinson, James A. & Torvik, Ragnar & Verdier, Thierry, 2006. "Political foundations of the resource curse," Journal of Development Economics, Elsevier, vol. 79(2), pages 447-468, April.
    10. Daron Acemoglu & James A. Robinson & Thierry Verdier, 2003. "Kleptocracy and Divide-and-Rule: A Model of Personal Rule," NBER Working Papers 10136, National Bureau of Economic Research, Inc.
    11. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
    12. Rodriguez, Francisco & Sachs, Jeffrey D, 1999. "Why Do Resource-Abundant Economies Grow More Slowly?," Journal of Economic Growth, Springer, vol. 4(3), pages 277-303, September.
    13. Carlos A Leite & Jens Weidmann, 1999. "Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth," IMF Working Papers 99/85, International Monetary Fund.
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    Citations

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    Cited by:

    1. Vladimir Popov, 2010. "Development theories and development experience: half a century journey," Working Papers w0153, Center for Economic and Financial Research (CEFIR).
    2. Vladimir Popov, 2009. "Why the West Became Rich before China and Why China Has Been Catching Up with the West since 1949: nother Explanation of the “Great Divergence” and “Great Convergence” Stories," Working Papers w0132, Center for Economic and Financial Research (CEFIR).
    3. Polterovich, Victor & Popov, Vladimir, 2007. "Демократизация И Экономический Рост
      [Democratization and Economic Growth]
      ," MPRA Paper 23012, University Library of Munich, Germany.
    4. Popov, Vladimir, 2010. "The Long Road to Normalcy," WIDER Working Paper Series 013, World Institute for Development Economic Research (UNU-WIDER).
    5. Polterovich, Victor & Popov, Vladimir & Tonis, Alexander, 2009. "Концентрация Доходов, Нестабильность Демократии И Экономический Рост
      [Income Concentration, Instability of Democracy and the Economic Growth]
      ," MPRA Paper 27561, University Library of Munich, Germany.
    6. Popov, Vladimir, 2009. "Lessons from the Transition Economies: Putting the Success Stories of the Postcommunist World into a Broader Perspective," WIDER Working Paper Series 015, World Institute for Development Economic Research (UNU-WIDER).
    7. Polterovich, Victor & Popov, Vladimir, 2007. "Democratization, Quality of Institutions and Economic Growth," MPRA Paper 19152, University Library of Munich, Germany.

    More about this item

    Keywords

    Democracy; resource abundance; corruption;

    JEL classification:

    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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