Stochastic petropolitics: The dynamics of institutions in resource-dependent economies

Raouf Boucekkine (), Fabien Prieur, Chrysovalantis Vasilakis and Benteng Zou

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Abstract: We investigate the link between resource revenues volatility and institutions. We build a stochastic differential game with two players (conservatives vs. liberals) lobbying for changing the institutions in their preferred directions. First, uncertainty surrounds the dynamics of institutions and the resource revenues. Second, the lobbying power is asymmetric, the conservatives' power being increasing with resource revenues. We show the existence of a unique equilibrium in the set of affine strategies. We then examine to which extent uncertainty leads to more liberal institutions in the long run, compared to the deterministic case. We finally explore the institutional impact of volatility using a database covering 91 countries over the period 1973–2005. Focusing on financial liberalization, we find that as oil revenue volatility increases, liberalization goes down. This result is robust to different specifications and sample distinctions.

Keywords: Institutional dynamics; Petropolitics; Lobbying games; Stochastic dynamic games; Financial liberalization policies (search for similar items in EconPapers)
Date: 2021-01
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Citations: View citations in EconPapers (4)

Published in European Economic Review, 2021, 131, pp.103610. ⟨10.1016/j.euroecorev.2020.103610⟩

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Related works:
Journal Article: Stochastic petropolitics: The dynamics of institutions in resource-dependent economies (2021)
Working Paper: Stochastic petropolitics: The dynamics of institutions in resource-dependent economies (2020)
Working Paper: Stochastic Petropolitics: The Dynamics of Institutions in Resource-Dependent Economies (2018)
Working Paper: Stochastic Petropolitics: The Dynamics of Institutions in Resource-Dependent Economies (2018)
Working Paper: Stochastic petropolitics: The dynamics of institutions in resource-dependent economies (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03040157

DOI: 10.1016/j.euroecorev.2020.103610

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