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On the Looting of Nations

Listed author(s):
  • Mare Sarr
  • Erwin Bulte
  • Chris Meissner
  • Tim Swanson

We develop a dynamic discrete choice model of an unchecked ruler making decisions regarding the development of a resource-rich country. Resources serve as collateral and facilitate the acquisition of loans. The ruler chooses either to stay in power while facing the risk of being ousted, or loot the country’s riches by liquefying the resources through lending. We show that unstructured lending from international credit markets can create incentives to loot the country; and an enhanced likelihood of looting causes greater political instability, and diminishes growth. Using a treatment effects model, we find strong evidence that supports our predictions.

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File URL: http://www.econrsa.org/node/206
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Paper provided by Economic Research Southern Africa in its series Working Papers with number 183.

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Length: 29 pages
Date of creation: 2010
Handle: RePEc:rza:wpaper:183
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