We study theoretically and empirically whether natural resource windfalls affect political regimes. We document the following regularities.
Natural resource windfalls have no effect on the political system when they occur in democracies. However, windfalls have significant political consequences in autocracies. In particular, when an autocratic country receives a positive shock to its flow of resource rents it responds by becoming even more autocratic. Furthermore, there is heterogeneity in the response of autocracies.
In deeply entrenched autocracies the eect of windfalls on politics is virtually nil, while in moderately entrenched autocracies windfalls signicantly exacerbate the autocratic nature of the political system.
A new paper by Caselli and Tesai