Petro Populism

26 Pages Posted: 7 May 2013

See all articles by Egil Matsen

Egil Matsen

Norwegian University of Science and Technology (NTNU) - Faculty of Social Sciences and Technology Management

Gisle James James Natvik

BI Norwegian Business School - Department of Economics

Ragnar Torvik

Norwegian University of Science and Technology (NTNU) - Department of Economics

Date Written: April 17, 2012

Abstract

We aim to explain petro populism - the excessive use of oil revenues to buy political support. To reap the full gains of natural resource income politicians need to remain in office over time. Hence, even a purely rent-seeking incumbent who only cares about his own welfare, will want to provide voters with goods and services if it promotes his probability of remaining in office. While this incentive benfits citizens under the rule of rent-seekers, it also has the adverse effect of motivating benevolent policymakers to short-term overprovision of goods and services. In equilibrium politicians of all types indulge in excessive resource extraction, while voters reward policies they realize cannot be sustained over time. Our model explains how resource wealth may generate political competition that reduces the tenability of equilibrium policies.

Keywords: resource curse, political economy

JEL Classification: D72, O13, Q33

Suggested Citation

Matsen, Egil and Natvik, Gisle James James and Torvik, Ragnar, Petro Populism (April 17, 2012). Norges Bank Working Paper 2012/06, Available at SSRN: https://ssrn.com/abstract=2258429 or http://dx.doi.org/10.2139/ssrn.2258429

Egil Matsen

Norwegian University of Science and Technology (NTNU) - Faculty of Social Sciences and Technology Management ( email )

NO-7491 Trondheim
Norway

Gisle James James Natvik (Contact Author)

BI Norwegian Business School - Department of Economics ( email )

Nydalsveien 37
Oslo, 0484
Norway

Ragnar Torvik

Norwegian University of Science and Technology (NTNU) - Department of Economics ( email )

N-7491 Trondheim
Norway
+47 735 91420 (Phone)
+47 735 96954 (Fax)

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