Atallah, Samer (2010): Economic Foundation of Dictatorship in Resource Exporting Economies.
Download (415Kb) | Preview
This paper explains the lack of democratization in resource exporting countries using a two period resource extraction model. There are two classes of agents: elite who own capital and natural resources and citizens who own labor. The elite announce, in the rst period, their plans for resource extraction and investment in the economy. Citizens, in the second period, decide whether to conduct a revolution against elite to capture their share of rents from un-extracted resources. Government policies are designed to ensure that the elite remain in power and that citizens do not have the incentive to revolt. These policies subsidize extraction and investment during the rst period. The extraction subsidy reduces the benet of revolution while the investment subsidy increases its cost. On the other hand, policies in the democracy case are not constrained by the revolution threat and represent the median voter preferences. The resource is over extracted in the non-democratic case compared to the democratic case. Also, investment in the non-resource sector is lower. The important nding of the model is that extraction path goes against price signals; rst period extraction increases with the increase of the resource price in the second period. Non-Democratic institution is the rational choice of the elite even with the costly policies to prevent a revolution.
|Item Type:||MPRA Paper|
|Original Title:||Economic Foundation of Dictatorship in Resource Exporting Economies|
|Keywords:||resource curse; political transition; institutions|
|Subjects:||Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q34 - Natural Resources and Domestic and International Conflicts
D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
|Depositing User:||Samer Atallah|
|Date Deposited:||10. Dec 2010 22:35|
|Last Modified:||15. Feb 2013 19:31|
World development indicators cd-rom, 2004. D. Acemoglu and J. Robinson. Economic Origins of Dictatorship and Democracy : Economic and Political Origins. 2006. Daron Acemoglu and James A. Robinson. A theory of political transitions. The American Eco- nomic Review, 91(4):938963, 2001. Jean-Marie Baland and Patrick Francois. Rent-seeking and resource booms. Journal of Develop- ment Economics, 61(2):527542, 2000. Christa N. Brunnschweiler and Erwin H. Bulte. The resource curse revisited and revised: A tale of paradoxes and red herrings. Journal of Environmental Economics and Management, 55(3): 248264, 2008. Francesco Caselli and Tom Cunningham. Leader behaviour and the natural resource curse. Oxford Economic Papers, 61(4):628650, 2009. 20 Jerey A. Frankel. The natural resource curse: A survey. National Bureau of Economic Research Working Paper Series, No. 15836, 2010. Author contact info: Jerey A. Frankel Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-3834 Fax: 617/496-5747 E-Mail: email@example.com. Thorvaldur Gylfason, Tryggvi Thor Herbertsson, and Gyl Zoega. A mixed blessing. Macroeco- nomic Dynamics, 3(02):204225, 1999. Roland Hodler. The curse of natural resources in fractionalized countries. European Economic Review, 50(6):13671386, 2006. Nathan Jensen and Leonard Wantchekon. Resource wealth and political regimes in africa. Com- parative Political Studies, 37(7):816841, 2004. Philip R. Lane and Aaron Tornell. Power, growth, and the voracity eect. Journal of Economic Growth, 1(2):213241, 1996. Seymour Martin Lipset. Some social requisites of democracy: Economic development and political legitimacy. The American Political Science Review, 53(1):69105, 1959. Halvor Mehlum, Karl Moene, and Ragnar Torvik. Institutions and the resource curse . The Economic Journal, 116(508):120, 2006. James A. Robinson, Ragnar Torvik, and Thierry Verdier. Political foundations of the resource curse. Journal of Development Economics, 79(2):447468, 2006. Michael L. Ross. Does oil hinder democracy? World Politics, 53(3):325361, 2001. Jerey D. Sachs and Andrew M. Warner. Natural resource abundance and economic growth. Technical report, National Bureau of Economic Research, Inc, Dec 1995. NBERWorking Papers. Jerey D. Sachs and Andrew M. Warner. The big push, natural resource booms and growth. Journal of Development Economics, 59(1):4376, 1999. Jerey D. Sachs and Andrew M. Warner. The curse of natural resources. European Economic Review, 45(4-6):827838, 2001. Agnar Sandmo. On the theory of the competitive rm under price uncertainty. The American Economic Review, 61(1):6573, 1971. Benjamin Smith. Oil wealth and regime survival in the developing world, 1960-1999. American Journal of Political Science, 48(2):232246, 2004. 21 Aaron Tornell and Philip R. Lane. The voracity eect. The American Economic Review, 89(1): 2246, 1999. 2