Electoral Politics, Fiscal Policy, and the Resource Curse

Abstract

While some governments use natural resources for immediate political gain, others create transparent institutions that promote sustainable long-term development. What explains this variation? Using novel data for 13 Latin American countries between 1990 and 2020, I show that incumbents are more likely to restrict their own discretion over the extractive sector when public support is high, but political opposition is strong. When rulers are safe in their seats, they can adopt long-run developmental strategies, rather than use public funds for short-term political survival. When there is a credible opposition, citizens can threaten to withhold support if the incumbent produces bad policy. The combination of high support and strong opposition provides space to implement long term-policy while generating enough short-term incentives to do so. These findings, illustrated by a case study of Mexico, suggest that a balance between job security and electoral risk drives resource-rich governments to adopt policies that – at least on paper – are more efficient in the long run.

Publication
Studies in Comparative International Development

Resource-rich states with at least one natural resource fund at the national or subnational level, 2020 Resource-rich states with at least one natural resource fund at the national or subnational level, 2020

Iasmin Goes
Iasmin Goes
Assistant Professor