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Journal ArticleDOI

On the looting of nations

TL;DR: The authors developed a dynamic discrete choice model of an unchecked ruler making decisions regarding the development of a resource rich country, and showed that unstructured lending from international credit markets can create incentives to loot the country; and an enhanced likelihood of looting causes greater political instability, and diminishes growth.
Abstract: We develop a dynamic discrete choice model of an unchecked ruler making decisions regarding the development of a resource rich country. Resources serve as collateral and facilitate the acquisition of loans. The ruler chooses either to stay in power while facing the risk of being ousted, or loot the country’s riches by liquefying the resources through lending. We show that unstructured lending from international credit markets can create incentives to loot the country; and an enhanced likelihood of looting causes greater political instability, and diminishes growth. Using a treatment effects model, we find evidence that supports our predictions.

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Citations
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01 Jan 1906

578 citations

Journal ArticleDOI
TL;DR: The authors evaluated the impact of major natural resource discoveries since 1950 on GDP per capita using panel fixed-effects estimation and resource discoveries in countries that were not previously resource-rich as a plausibly exogenous source of variation.

212 citations


Cites background from "On the looting of nations"

  • ...Another form treats institutions as exogenous to resource wealth, and the interaction between resources and institutions explains the divergent outcomes of resource-rich countries (Robinson et al 2006, Mehlum et al 2006, Sarr et al 2011)....

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Journal ArticleDOI
TL;DR: This article examined the impact of military expenditure on economic growth on a large balanced panel, using an exogenous growth model and dynamic panel data methods for 106 countries over the period 1988-2010.
Abstract: This paper examines the impact of military expenditure on economic growth on a large balanced panel, using an exogenous growth model and dynamic panel data methods for 106 countries over the period 1988–2010 A major focus of the paper is to consider the possibility group heterogeneity and non-linearity Having estimated the model for all of the countries in the panel and finding that military burden has a negative effect on growth in the short and long run, the panel is broken down into various groupings based upon a range of potentially relevant factors, and the robustness of the results is evaluated The factors considered are different levels of income, conflict experience, natural resources abundance, openness and aid The estimates for the different groups are remarkably consistent with those for the whole panel, providing strong support for the argument that military spending has adverse effects on growth There are, however, some intriguing results that suggest that for certain types of countries

115 citations

01 Mar 2008
TL;DR: In this paper, the authors proposed a method to solve the problem of the lack of resources in the South Korean market, by using the concept of "social media" and "social networks".
Abstract: 본 논문은 자원부국들의 천연자원 수출이 각기 다른 경제적 영향을 보이는 이유에 대해 연구하였다. 가령 라틴아메리카의 경우 다른 자원부국들과는 달리 저조한 경제성장을 보였다. 이에 대해 선행연구에서는 천연자원의 풍요가 오히려 경제성장에 부정적인 영향을 준다고 논증한 바 있다. 그러나 본 연구에서는 1인당 국민소득이 어느 수준 이상일 경우 천연자원 수출과 경제성장 간의 역의 상관관계가 존재하지 않음을 보이고 있다. 분석에 따르면, 1인당 국민소득이 낮은 라틴아메리카 국가들의 경우 풍부한 천연자원이 경제성장에 부정적인 영향을 미치는 반면, 1인당 국민소득이 높은 선진국의 경우 이러한 음의 효과가 나타나지 않았다. 이같이 천연자원 수출이 자원부국들 간 서로 다른 영향을 보인 이유는, 정부의 효율성, 법치, 부패통제 등 ‘제도의 질’이 낮은 라틴아메리카의 경우 천연자원 수출로 얻은 자원을 비효율적으로 활용하여 인적·물적 자원을 축적하지 못했으며, 이로 인해 궁극적으로 저조한 경제성장을 이루게 되었다는 데 있다.

96 citations

References
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Journal ArticleDOI
TL;DR: In this paper, the authors distinguish between natural resource dependence and the natural resource endowment (RE), and estimate three models, using World Bank data on national capital stocks, to explore whether natural resource abundance leads, other things equal, to slower growth rates.
Abstract: This paper explores whether natural resource abundance leads, other things equal, to slower growth rates. We distinguish between natural resource dependence (RD) and the natural resource endowment (RE). We estimate three models, using World Bank data on national capital stocks. In a one-equation model we show that RD has a negative effect on growth rates, apparently confirming the main results of the resource "curse" literature. RE, however, has a positive impact on growth. We then estimate a two-equation model, in which the impacts of RE are much weaker. Finally, we estimate a three-equation model, in which the impacts of natural resources on growth disappears.

461 citations


"On the looting of nations" refers background in this paper

  • ...An extensive literature documents that resource wealth can be a curse rather than a blessing for many countries (Sachs and Warner 1995)....

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Journal ArticleDOI
TL;DR: The authors argue that the success of kleptocrats rests, in part, on their ability to use a divide-and-rule strategy, made possible by the weakness of institutions in these societies.
Abstract: Many developing countries have suffered under the personal rule of kleptocrats, who implement highly inefe cient economic policies, expropriate the wealth of their citizens, and use the proceeds for their own glorie cation or consumption. We argue that the success of kleptocrats rests, in part, on their ability to use a divide-and-rule strategy, made possible by the weakness of institutions in these societies. Members of society need to cooperate in order to depose a kleptocrat, yet such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move, and redistributing the benee ts to those who need to agree to it. Thus the collective action problem can be intensie ed by threats which remain off the equilibrium path. In equilibrium, all are exploited and no one challenges the kleptocrat. Kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents; when opposition groups are shortsighted; when the average productivity in the economy is low; and when there is greater inequality between producer groups (because more productive groups are more dife cult to buy off). (JEL: O12, H00)

423 citations

Posted Content
TL;DR: In this article, the authors argue that the success of kleptocrats rests on their ability to use a particular type of political strategy, which they refer to as "divide-and-rule" and highlight the different nature of politics between strongly and weakly-institutionalized polities.
Abstract: Many developing countries have suffered under the personal rule of ‘kleptocrats’, who implement highly inefficient economic policies, expropriate the wealth of their citizens, and use the proceeds for their own glorification or consumption. The incidence of kleptocracy is a serious impediment to development. Yet how do kleptocrats survive? How can they apparently exploit the entire citizenship of countries and not foment successful opposition? In this research we argue that the success of kleptocrats rests on their ability to use a particular type of political strategy, which we refer to as ‘divide-and-rule’. Members of society need to cooperate in order to depose a kleptocrat. A kleptocrat, however, may defuse such cooperation by imposing punitive rates of taxation on any citizen who proposes such a move, and redistributing the benefits to those who need to agree to it. Thus kleptocrats can intensify the collective action problem by threats that remain off the equilibrium path. In equilibrium, all are exploited and no one challenges the kleptocrat because of the threat of divide-and-rule. The divide-and-rule strategy is made possible by the weakness of the institutions in these societies, and highlights the different nature of politics between strongly- and weakly-institutionalized polities. We show that foreign aid and rents from natural resources typically help kleptocratic rulers by providing them with greater resources to buy off opponents. Kleptocratic policies are also more likely to arise when opposition groups are shortsighted and when the average productivity in the economy is low. We also find that greater inequality between producer groups may constrain kleptocratic policies because more productive groups are more difficult to buy off.

420 citations


"On the looting of nations" refers background or result in this paper

  • ...(2) transitory investment in the country’s capital base to build up additional liquidity for looting in the medium term; or (3) long-term investment in the economy (and possibly in shared consumption or political repression) in an attempt to secure tenure and to consume from the economy....

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  • ...In column (2) of the growth equation, we control for country fixed effects....

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  • ...045) with fixed effects in column (2)....

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  • ...The outcome (growth) model supports this claim as well—see columns (1) and (2) in Panel A....

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  • ...These three assumptions are sufficient for establishing the structure of our autocrat’s choice problem, which is built upon the premise that the ruler is pursuing his own agenda after assuming control of the state (Acemoglu et al. 2004)....

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Journal Article
TL;DR: A finger operated electro-optical lock system in which an optical keyboard having at least one zone indicated thereon is illuminated by ambient energy until touched by a finger of the human hand blocking the radiant energy passing through the zone.
Abstract: Productive public good investment allocations, and group discriminatory redistributions are conflicting resource use options between which every government must choose irrespective of its political make up. This paper is the first to derive an incisive explanation of how governments combine political and economic calculation to balance these competing choices. Realistic societies can be analyzed as a mixture of two polar cases — idealized, utopian, consensual democracy and perfect autocracy. Thus, in making the choice between social investment and redistributive taxation every government behaves somewhat like an pure democracy and somewhat like a selfish dictatorship.

414 citations


"On the looting of nations" refers background in this paper

  • ...5Comparing Figures 2 and 4 demonstrates the point of McGuire and Olson (1996)....

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Posted Content
TL;DR: The authors showed that the negative relationship between resource abundance and growth is not due to the abundance of resources, but rather to a debt overhang in the resource-rich countries of the world.
Abstract: It has been widely believed that resource abundant economies grow less than other economies. In a very influential paper, Sachs and Warner (1997), point out that there is a negative relationship between resource abundance and growth. Two important econometric problems are present in the traditional empirical literature: First, the result might depend on factors that are correlated with primary exports but that have been excluded from the regression. Second, total GDP includes the production in the resource sector that has been declining in the last 30 years. We correct for those issues. Our results indicate that the so called 'Natural Resource Curse' might be related to a debt overhang. In the 70's when commodities' prices were high, natural resource abundant countries used them as collateral for debt. The 80's witnessed an important fall in the prices that drove these countries to debt crises. When we estimate the model taking these into account, we found that the effect of resource abundance disappears.

384 citations


"On the looting of nations" refers background in this paper

  • ...Manzano and Rigobon (2001) find that the resource curse vanishes when controlling for indebtedness....

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  • ...Reduced growth in resource-rich countries has been associated with (i) increased indebtedness (Manzano and Rigobon 2001), (ii) domestic conflict and political instability (Collier and Hoeffler 2004), and with (iii) autocratic regimes and poor institutions (Ross 2001; Isham et al. 2005)....

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  • ...The evolution of these two indicators is indicative of the “boom-based borrowing capacity” highlighted by Usui (1997), and Manzano and Rigobon (2001)....

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