The Political Economy of Public Income Volatility: With an Application to the Resource Curse

James Robinson, Ragnar Torvik and Thierry Verdier

No 21205, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a model of the political consequences of public income volatility. As is standard, political incentives create inefficient policies, but we show that making income uncertain creates specific new effects. Future volatility reduces the benefit of being in power, making policy more efficient. Yet at the same time it also reduces the re-election probability of an incumbent and since some of the policy inefficiencies are concentrated in the future, this makes inefficient policy less costly. We show how this model can help think about the connection between volatility and economic growth and in the case where volatility comes from volatile natural resource prices, a characteristic of many developing countries, we show that volatility in itself is a source of inefficient resource extraction.

JEL-codes: D72 D78 Q2 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-cdm, nep-ene, nep-ltv and nep-pol
Note: POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Robinson, James A. & Torvik, Ragnar & Verdier, Thierry, 2017. "The political economy of public income volatility: With an application to the resource curse," Journal of Public Economics, Elsevier, vol. 145(C), pages 243-252.

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Related works:
Journal Article: The political economy of public income volatility: With an application to the resource curse (2017)
Working Paper: The political economy of public income volatility: With an application to the resource curse (2017)
Working Paper: The political economy of public income volatility: With an application to the resource curse (2017)
Working Paper: The Political Economy of Public Income Volatility: With an Application to the Resource Curse (2015)
Working Paper: The Political Economy of Public Income Volatility: With an Application to the Resource Curse (2015)
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