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Resource Abundance, Political Corruption, and Instability of Democracy

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

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19154.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:19154
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  1. 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.
  2. James A. Robinson & Ragnar Torvik & Thierry Verdier, 2003. "Politcal Foundations of the Resource Curse," DELTA Working Papers 2003-33, DELTA (Ecole normale supérieure).
  3. 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.
  4. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," Economics Working Papers 0047, Institute for Advanced Study, School of Social Science.
  5. Christa N. Brunnschweiler, 2006. "Cursing the blessings? Natural resource abundance, institutions, and economic growth," CER-ETH Economics working paper series 06/51, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  6. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2002. "Institutions and the resource curse," GE, Growth, Math methods 0210004, EconWPA.
  7. 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.
  8. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  9. 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.
  10. Jean-Philippe Stijns, 2001. "Natural Resource Abundance And Economic Growth Revisited," Development and Comp Systems 0103001, EconWPA.
  11. Carlos Leite & Jens Weidmann, 1999. "Does Mother Nature Corrupt; Natural Resources, Corruption, and Economic Growth," IMF Working Papers 99/85, International Monetary Fund.
  12. Clague, Christopher & Keefer, Philip & Knack, Stephen & Olson, Mancur, 1996. "Property and Contract Rights in Autocracies and Democracies," MPRA Paper 25720, University Library of Munich, Germany.
  13. Clague, Christopher, et al, 1996. " Property and Contract Rights in Autocracies and Democracies," Journal of Economic Growth, Springer, vol. 1(2), pages 243-76, June.
  14. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-42, June.
  15. Polterovich, Victor & Popov, Vladimir, 2007. "Democratization, Quality of Institutions and Economic Growth," MPRA Paper 19152, University Library of Munich, Germany.
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