The Voracity Effect
TL;DR: In this paper, the authors analyze an economy that lacks a strong legal-political institutional infrastructure and is populated by multiple powerful groups, and they show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks.
Abstract: We analyze an economy that lacks a strong legal-political institutional infrastructure and is populated by multiple powerful groups. Powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock. In equilibrium, this leads to slow economic growth and a “voracity effect,” by which a shock, such as a terms of trade windfall, perversely generates a more-than-proportionate increase in fiscal redistribution and reduces growth. We also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks. (JEL F43, O10, O23, O40)
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TL;DR: Collier and Hoeffler as discussed by the authors compare two contrasting motivations for rebellion: greed and grievance, and show that many rebellions are linked to the capture of resources (such as diamonds in Angola and Sierra Leone, drugs in Colombia, and timber in Cambodia).
Abstract: Of the 27 major armed conflicts that occurred in 1999, all but two took place within national boundaries. As an impediment to development, internal rebellion especially hurts the world's poorest countries. What motivates civil wars? Greed or grievance? Collier and Hoeffler compare two contrasting motivations for rebellion: greed and grievance. Most rebellions are ostensibly in pursuit of a cause, supported by a narrative of grievance. But since grievance assuagement through rebellion is a public good that a government will not supply, economists predict such rebellions would be rare. Empirically, many rebellions appear to be linked to the capture of resources (such as diamonds in Angola and Sierra Leone, drugs in Colombia, and timber in Cambodia). Collier and Hoeffler set up a simple rational choice model of greed-rebellion and contrast its predictions with those of a simple grievance model. Some countries return to conflict repeatedly. Are they conflict-prone or is there a feedback effect whereby conflict generates grievance, which in turn generates further conflict? The authors show why such a feedback effect might be present in both greed-motivated and grievance rebellions. The authors' results contrast with conventional beliefs about the causes of conflict. A stylized version of conventional beliefs would be that grievance begets conflict, which begets grievance, which begets further conflict. With such a model, the only point at which to intervene is to reduce the level of objective grievance. Collier and Hoeffler's model suggests that what actually happens is that opportunities for predation (controlling primary commodity exports) cause conflict and the grievances this generates induce dias-poras to finance further conflict. The point of policy intervention here is to reduce the absolute and relative attraction of primary commodity predation and to reduce the ability of diasporas to fund rebel movements. This paper - a product of the Development Research Group - is part of a larger effort in the group to study civil war and criminal violence. For more on this effort, go to www.worldbank.org/research/conflict. Paul Collier may be contacted at pcollier@worldbank.org.
5,349 citations
TL;DR: The authors investigated the causes of civil war, using a new data set of wars during 1960-99 and found that economic viability appears to be the predominant systematic explanation of rebellion, while atypically severe grievances such as high inequality, a lack of political rights, or ethnic and religious divisions in society.
Abstract: This study investigates the causes of civil war, using a new data set of wars during 1960-99. Rebellion may be explained by atypically severe grievances, such as high inequality, a lack of political rights, or ethnic and religious divisions in society. Alternatively, it might be explained by atypical opportunities for building a rebel organization. Opportunity may be determined by access to finance, such as the scope for extortion of natural resources, and for donations from a Diaspora population. Opportunity may also depend upon factors such as geography: mountains and forests may be needed to incubate rebellion. These explanations are tested and find that opportunity provides considerably more explanatory power than grievance. Economic viability appears to be the predominant systematic explanation of rebellion. The results are robust to correction for outliers, alternative variable definition, and variations in estimation method
3,808 citations
Posted Content•
TL;DR: In this article, the authors claim that the main reason for diverging experiences is differences in the quality of institutions, and they test this theory building on Sachs and Warner's influential works on the resource curse.
Abstract: Countries rich in natural resources constitute both growth losers and growth winners. We claim that the main reason for these diverging experiences is differences in the quality of institutions. More natural resources push aggregate income down, when institutions are grabber friendly, while more resources raise income, when institutions are producer friendly. We test this theory building on Sachs and Warner's influential works on the resource curse. Our main hypothesis: that institutions are decisive for the resource curse, is confirmed. Our results are in sharp contrast to the claim by Sachs and Warner that institutions do not play a role.
2,148 citations
TL;DR: In this paper, the authors claim that the main reason for diverging experiences is differences in the quality of institutions, and they test this theory building on Sachs and Warner's influential works on the resource curse.
Abstract: Countries rich in natural resources constitute both growth losers and growth winners. We claim that the main reason for these diverging experiences is differences in the quality of institutions. More natural resources push aggregate income down, when institutions are grabber friendly, while more resources raise income, when institutions are producer friendly. We test this theory building on Sachs and Warner's influential works on the resource curse. Our main hypothesis – that institutions are decisive for the resource curse – is confirmed. Our results contrast the claims of Sachs and Warner that institutions do not play a role.
1,917 citations
Cites background from "The Voracity Effect"
...Lane and Tornell (1996) and Tornell and Lane (1999) explain the disappointing...
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...Tornell (1996), Tornell and Lane (1999) and Torvik (2002) also predict a monotonic...
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Posted Content•
TL;DR: This paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources and offers some welfare-based fiscal rules for harnessing resource windfalls in developed and developing economies.
Abstract: Are natural resources a “curse” or a “blessing”? The empirical evidence suggests either outcome is possible. The paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. These include that a resource bonanza induces appreciation of the real exchange rate, deindustrialization and bad growth prospects, and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law, corruption, presidential democracies, and underdeveloped financial systems. Another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad, induces corruption especially in non-democratic countries, and keeps in place bad policies. Finally, resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets. The survey also offers some welfare-based fiscal rules for harnessing resource windfalls in developed and developing economies.
1,570 citations
References
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TL;DR: This article showed that ethnic diversity helps explain cross-country differences in public policies and other economic indicators in Sub-Saharan Africa, and that high ethnic fragmentation explains a significant part of most of these characteristics.
Abstract: Explaining cross-country differences in growth rates requires not only an understanding of the link between growth and public policies, but also an understanding of why countries choose different public policies. This paper shows that ethnic diversity helps explain cross-country differences in public policies and other economic indicators. In the case of Sub-Saharan Africa, economic growth is associated with low schooling, political instability, underdeveloped financial systems, distorted foreign exchange markets, high government deficits, and insufficient infrastructure. Africa's high ethnic fragmentation explains a significant part of most of these characteristics.
5,648 citations
"The Voracity Effect" refers background in this paper
...This evidence is comprehensively documented by Easterly and Levine (1997)....
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TL;DR: The authors compared more direct measures of the institutional environment with both the instability proxies used by Barro (1991) and the Gastil indices, by comparing their effects both on growth and private investment.
Abstract: This paper compares more direct measures of the institutional environment with both the instability proxies used by Barro (1991) and the Gastil indices, by comparing their effects both on growth and private investment. The results provide substantial support for the position that the institutional roots of growth and convergence are significant. The marked improvement that these new variables represent over existing proxies also suggests that there are substantial returns to future research into variables that reflect the security of property rights and the efficiency with which states determine economic policies and allocate public goods.
4,981 citations
Book•
01 Jan 1982
TL;DR: In this paper, the authors present a general formulation of non-cooperative finite games: N-Person nonzero-sum games, Pursuit-Evasion games, and Stackelberg Equilibria of infinite dynamic games.
Abstract: Preface to the classics edition Preface to the second edition 1. Introduction and motivation Part I: 2. Noncooperative Finite Games: two-person zero-aum 3. Noncooperative finite games: N-Person nonzero-sum 4. Static noncooperative Infinite Games Part II: 5. General Formulation of Infinite Dynamic Games 6. Nash and Saddle-Point Equilibria of Infinite Dynamic Games 7. Stackelberg Equilibria of Infinite Dynamic Games 8. Pursuit-Evasion Games Appendix A: Mathematical Review Appendix B: Some notions of probability theory Appendix C: Fixed point theorems Bibliography Table: Corollaries, Definitions, Examples, Lemmas, Propositions, remarks and theorems Index.
4,471 citations
"The Voracity Effect" refers background in this paper
...Again, we will focus on the interior equilibrium....
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Posted Content•
TL;DR: The authors showed that countries with a high ratio of natural resource exports to GDP tended to have low growth rates during the subsequent period 1971-89, even after controlling for variables found to be important for economic growth, such as initial per capita income, trade policy, government efficiency, investment rates, and other variables.
Abstract: One of the surprising features of modern economic growth is that economies with abundant natural resources have tended to grow less rapidly than natural-resource-scarce economies. In this paper we show that economies with a high ratio of natural resource exports to GDP in 1971 (the base year) tended to have low growth rates during the subsequent period 1971-89. This negative relationship holds true even after controlling for variables found to be important for economic growth, such as initial per capita income, trade policy, government efficiency, investment rates, and other variables. We explore the possible pathways for this negative relationship by studying the cross-country effects of resource endowments on trade policy, bureaucratic efficiency, and other determinants of growth. We also provide a simple theoretical model of endogenous growth that might help to explain the observed negative relationship.
3,511 citations
TL;DR: This article present a model of bargaining between politicians and managers that explains many stylized facts about the behavior of state firms, their commercialization, and privatization, including subsidies to public enterprises and bribes from managers to politicians.
Abstract: We present a model of bargaining between politicians and managers that explains many stylized facts about the behavior of state firms, their commercialization, and privatization. Subsidies to public enterprises and bribes from managers to politicians emerge naturally in the model. We use the model and several extensions to understand why commercialization and privatization might work, and what forces contribute to effective restructuring of public enterprises. We illustrate the model using examples from several countries.
3,143 citations