Economics and Finance Faculty Publications and Presentations

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Using annual data from 1980 to 2014, we reexamine the relationship between democracy and natural resources for a large sample of emerging market economies. Controlling for human capital (or real GDP per capita) and openness measures, dynamic panel methods address endogeneity from more democratic regimes demanding better control of rents. We find that democracy responds positively to natural resource rents in GDP (NAT) and negatively to terms of trade (TOT). The NAT positive effects mitigate the negative impact of TOT on democracy and holds well in different specifications. By building on a literature focusing on oil rents, increases in NAT (extra revenue over production costs) represent a windfall for mining companies. This leads society to require higher levels of participation in decisions to exploit these rents more transparently. We also find that diversification of rents helps democracy, especially in economies with high shares of oil rents.


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The Extractive Industries and Society



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Finance Commons



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