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

James Robinson, Ragnar Torvik and Thierry Verdier

No No 3/2015, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

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.

Keywords: Income Volatility; Public Policy; Politics; Resource Extraction (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-03
New Economics Papers: this item is included in nep-ltv and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.bi.edu/contentassets/06c294b740ec40fc8 ... king_camp_3-2015.pdf (application/pdf)

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)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0031

Access Statistics for this paper

More papers in Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School Contact information at EDIRC.
Bibliographic data for series maintained by Helene Olsen ().