Centre for the Study of African Economies Democracy and Development Anke Hoeffler Centre for the Study of African Economies Department of Economics, University of Oxford

Centre for the Study of African Economies Testing the Neocon Agenda: Democracy in Resource-Rich Societies Paul Collier and Anke Hoeffler Centre for the Study of African Economies Department of Economics, University of Oxford

Centre for the Study of African Economies ‘ Neocon Agenda’ using ‘American Power to reshape the global environment in the name of a set of liberal democratic ideals. It is their belief that this will make the United States more secure by reducing the seemingly intractable problems of the Middle East, thus getting at some of the root causes of terrorism.’ Selden (2004), Hoover Institution Policy Review

Centre for the Study of African Economies growth natural resources democracy

Centre for the Study of African Economies Effect of Resources on Economic Consequences of Democracy Is democracy more or less beneficial in resource rich societies? Long run: democracy endogenous to resource rents

Centre for the Study of African Economies Mechanisms that undermine the benefits of democracy Public goods – Patronage goods In a well functioning polity: patronage goods result in electoral defeat and prosecution – Restraints Model: provision of patronage goods s.t. to constraints and how these constraints are affected by natural resources

Centre for the Study of African Economies Model Checks&balances prevent diversion into patronage (more public goods) Constraints: Taxation results in more scrutiny Patronage is a function of government revenue and embezzlement Embezzlement rate depends on taxation

Centre for the Study of African Economies Model plus natural resources Natural resources relax the constraint (less taxation) Patronage is higher, due to less scrutiny not due to higher revenue Embezzlement – natural resources (high/low)

Centre for the Study of African Economies Democracy Scores PeriodSampleHigh Natural Rents Countries

Centre for the Study of African Economies Democracy and Checks and Balances

Centre for the Study of African Economies Growth, Democracy and Natural Resource Rents (1)(2)(7) ln GDP (0.702)(0.284)(0.104) Nat. Resources (0.154)(0.572) Democracy (0.036)**(0.005)***(0.002)*** NatRes·Dem (0.096)*(0.002)*** NatRes t (0.042)** NatRes·Checks (0.033)** Observations R2R

Centre for the Study of African Economies Results democratic countries have higher growth interaction between resource rents and democracy is negative interaction between resource rents and checks is positive

Centre for the Study of African Economies Conclusion a priori the effect of natural resources on the economic consequences of democracy is ambiguous Distinction: electoral competition - checks&balances Resource rents unleash patronage politics Resource rents undermine checks&balances Checks&balances are a public good, undersupplied Neocon agenda has to be scaled up or down

Centre for the Study of African Economies Democracy’s Achilles Heel or, How to Win an Election without Really Trying Paul Collier and Anke Hoeffler Centre for the Study of African Economies Department of Economics, University of Oxford

Centre for the Study of African Economies Leader’s Choices Election Strategy Economic Policy Rents R Growth g Licit tactics Win depends on growth Illicit tactics – penalty P Win assured

Centre for the Study of African Economies Dirty ElectionsClean ElectionsTotal Incumbent did not stand (29%) Incumbent election (71%) Total324 (41%)462 (59%)786 Table 1: How many Elections are Contested by Incumbents?

Centre for the Study of African Economies Dirty ElectionClean ElectionTotal Incumbent loses (43%) Incumbent wins (57%) Total251 (19%)307 (81%)558 Table 2: How many Elections are Won by Incumbents?

Centre for the Study of African Economies (4) Core Model(5) (6) Dirty Elections Only (7) Clean Elections only Democracy wave (2.47)** (2.91)*** (1.36) (2.37)** S.S. Africa (3.19)***1.222 (3.22)***0.930 (1.87)*1.392 (2.07)** Sec. Enrolment (3.15)***0.022 (4.02)***0.027 (2.31)**0.017 (2.96)*** Growth (3.03)***0.090 (3.39)***0.083 (2.17)**0.105 (2.42)** Pop. growth (1.47)0.190 (1.46)0.292 (1.49)0.198 (1.09) Clean election (4.36)*** (2.12)** Press freedom (3.86)*** (4.71)*** (1.21) Observations Pseudo R Log Likelihood Table 3: How do Incumbents Win Elections?

Centre for the Study of African Economies (3)(4)(5)(6) Democracy Wave0.569(2.03)**0.672(1.80)*0.384(0.86)0.668(1.64)0.689(1.88)* ln Population0.271(2.58)***0.213(1.49)0.259(1.81)*0.175(1.19)0.198(1.35) Ln GDP(t-1)0.568(3.87)***0.626(3.15)***0.343(1.90)*0.920(5.04)***0.563(2.83)*** Resource-0.065(3.44)***-0.096(3.05)***0.014(0.39)-0.132(3.06)***-0.095(3.09)*** Checks1.104(7.62)***1.265(6.39)***0.921(4.25)***1.133(5.70)***1.253(6.14)*** Pressfreedom1.059(4.19)***0.996(3.04)***1.391(3.34)***0.800(2.35)**0.902(2.82)*** Termlimits-1.669(1.14) Rents*terml0.352(2.15)** Illegal Entry-1.098(1.66)* Observations PseudoR Log Likelihood Table 5: What Determines Clean Elections?

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