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Resource Curse, Political Entry, And Deadweight Costs

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  • KEVIN K. TSUI
Abstract
A simple model of political entry in a two‐sector economy is developed to analyze the effects of natural resource wealth on economic policy, political development, and civil insurrection. The model emphasizes the role of political entry and deadweight costs of taxation on the joint determination of these economic and political outcomes. Contrary to popular belief, my model shows that natural resource abundance is an economic blessing even in a rent‐seeking society, although resource dependence can be negatively associated with economic performance. In a contested political market, dictators care about popular support and hence resource wealth can help reduce the deadweight cost of taxation (and hence the cost of public good provision). On the other hand, natural resource wealth can be a political curse, because it encourages political entry and hence it induces incumbent dictators to run more repressive regimes. With constant returns counterinsurgent technology, however, the equilibrium number of insurgents is independent of the size of resource wealth. The onset of civil war, therefore, depends on the counterinsurgent technology and whether the costs of entry deterrence are affected by resource wealth. This helps clarify the two seemingly contradictory hypotheses that “resource wealth enhances regime durability” and “resource wealth fuels conflict.”

Suggested Citation

  • Kevin K. Tsui, 2010. "Resource Curse, Political Entry, And Deadweight Costs," Economics and Politics, Wiley Blackwell, vol. 22(3), pages 471-497, November.
    • Handle: RePEc:bla:ecopol:v:22:y:2010:i:3:p:471-497
    DOI: 10.1111/j.1468-0343.2010.00373.x
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    6. Carolyn Chisadza & Matthew Clance & Rangan Gupta & Mark E. Wohar, 2024. "Giant oil discoveries and conflicts," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(6), pages 15681-15710, June.
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    10. Mulligan, Casey B. & Tsui, Kevin K., 2015. "Political entry, public policies, and the economy," Research in Economics, Elsevier, vol. 69(3), pages 377-397.
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    12. Ishak Phoebe W., 2019. "Autocratic Survival Strategies: Does Oil Make a Difference?," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 25(2), pages 1-22, May.
    13. Kim, Dong-Hyeon & Lin, Shu-Chin, 2017. "Human capital and natural resource dependence," Structural Change and Economic Dynamics, Elsevier, vol. 40(C), pages 92-102.
    14. Dizaji, S.F., 2019. "The potential impact of oil sanctions on military spending and democracy in the Middle East," ISS Working Papers - General Series 644, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    15. Desiree A. Desierto, 2018. "Formal models of the political resource curse," Economics of Governance, Springer, vol. 19(3), pages 225-259, August.
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