Democracy and the curse of natural resources

Antonio Cabrales and Esther Hauk

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: We propose a theoretical model to explain empirical regularities related to the curse of natural resources. This is an explicitly political model which emphasizes the behavior and incentives of politicians. We extend the standard voting model to give voters political control beyond the elections. This gives rise to a new restriction into our political economy model: policies should not give rise to a revolution. Our model clarifies when resource discoveries might lead to revolutions, namely, in countries with weak institutions. Natural resources may be bad for democracy by harming political turnover. Our model also suggests a non-linear dependence of human capital on natural resources. For low levels of democracy human capital depends negatively on natural resources, while for high levels of democracy the dependence is reversed. This theoretical finding is corroborated in both cross section and panel data regressions.

Keywords: Curse; of; natural; resources; Democracy; Political; game; Revolution; Human; capital (search for similar items in EconPapers)
JEL-codes: D72 H52 O13 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-cdm, nep-env and nep-pol
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Related works:
Working Paper: Democracy and the curse of natural resources (2009)
Working Paper: Democracy and the curse of natural resources (2009)
Working Paper: Democracy and the curse of natural resources (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we075429

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