The political economy of public income volatility: With an application to the resource curse

• 成果类型: Article
• 署名作者: Robinson, James A.; Torvik, Ragnar; Verdier, Thierry
• 署名单位: University of Chicago; Norwegian University of Science & Technology (NTNU); Institut Polytechnique de Paris; Ecole des Ponts ParisTech
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2016.11.014
• 发表日期: 2017
• 页码: 243-252
• 关键词: Income volatility; public policy; POLITICS; Resource extraction

摘要

In recent years many countries have witnessed a great deal of volatility in public budgets, be it due to volatility in the access to foreign loans in Greece, or to unstable oil prices in Venezuela. We study the political consequences of such public income volatility. As is standard, in out model political incentives create inefficient policies to increase re-election probabilities, but we show that making public 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, such as patronage public employment, less costly. Our model highlights a new political economy connection between the volatility of the public budget and economic growth. In the case where volatility comes from natural resource prices, a characteristic of many developing countries, we show that volatility in itself may be a source of inefficient resource extraction, jointly interacting with increased patronage employment. (C) 2016 Elsevier B.V. All rights reserved.