Resource Windfalls, Political Regimes, and Political Stability

45 Pages Posted: 6 Jul 2013

See all articles by Francesco Caselli

Francesco Caselli

London School of Economics & Political Science (LSE) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Andrea Tesei

Queen Mary University of London - School of Economics and Finance

Multiple version iconThere are 3 versions of this paper

Date Written: May 6, 2013

Abstract

We study theoretically and empirically whether natural resource windfalls affect political regimes. We document the following regularities. Natural resource windfalls have no effect on the political system when they occur in democracies. However, windfalls have significant political consequences in autocracies. In particular, when an autocratic country receives a positive shock to its flow of resource rents it responds by becoming even more autocratic. Furthermore, there is heterogeneity in the response of autocracies. In deeply entrenched autocracies the effect of windfalls on politics is virtually nil, while in moderately entrenched autocracies windfalls significantly exacerbate the autocratic nature of the political system. To frame the empirical work we present a simple model in which political incumbents choose the degree of political contestability by deciding how much to spend on vote-buying, bullying, or outright repression. Potential challengers decide whether or not to try to unseat the incumbent and replace him. The model uncovers a mechanism for the asymmetric impact of resource windfalls on democracies and autocracies, as well as the the differential impact within autocratic regimes.

Keywords: Resource Curse, Democratization, Commodity Prices

JEL Classification: O10, P16

Suggested Citation

Caselli, Francesco and Tesei, Andrea, Resource Windfalls, Political Regimes, and Political Stability (May 6, 2013). Available at SSRN: https://ssrn.com/abstract=2290513 or http://dx.doi.org/10.2139/ssrn.2290513

Francesco Caselli

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrea Tesei (Contact Author)

Queen Mary University of London - School of Economics and Finance ( email )

Lincoln's Inn Fields
Mile End Rd.
London, E1 4NS
United Kingdom

HOME PAGE: http://andreatesei.com

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