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Stochastic Petropolitics: The Dynamics of Institutions in Resource-Dependent Economies

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

Working Papers from HAL

Abstract: We provide an analysis of institutional dynamics under uncertainty by means of a stochastic differential game of lobbying with two players (conservatives vs liberals) and three main ingredients. The first one is uncertainty inherent in the institutional process itself. The second considers resource windfalls volatility impact on economic and institutional outcomes. Last but not least, the resource windfall level matters in the relative bargaining power of the players. We compute a unique closed-loop equilibrium with linear feedbacks. We show that the legislative state converges to an invariant distribution. Even more importantly, we demonstrate that the most likely asymptotic legislative state is favorable to the liberals. However, the more volatile resource windfalls, the less liberal is the most likely asymptotic state. Finally, we assess the latter prediction on a database covering 91 countries over the period 1973-2005. We focus on financial liberalization policies. We find that as the resources revenues volatility increases, the financial liberalization index goes down. We also find that this property remains robust across different specifications and sample distinctions.

Keywords: stochastic dynamic games; stochastic stability; institutional dynamics; petropolitics; lobbying games; revenue-dependent lobbying power (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm and nep-gth
Date: 2018-04
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01758376
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Working Paper: Stochastic Petropolitics: The Dynamics of Institutions in Resource-Dependent Economies (2018) Downloads
Working Paper: Stochastic petropolitics: The dynamics of institutions in resource-dependent economies (2018) Downloads
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