On the looting of nations
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TLDR
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.read more
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References
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Journal Article
The Varieties of Resource Experience
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Assaf Razin,Yona Rubinstein +1 more
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TL;DR: In the widely used textbook International Economics: Theory and Policy by Paul Krugman and Maurice Obstfeld (2009), a case is made for why free trade is better than protectionism as discussed by the authors.