Election cycles in natural resource rents: where do they come from and where do they go? - Seminar by Jeroen Klomp

Organised by Section Economics, Hollandseweg 1, 6706 KN Wageningen

Thu 8 January 2015 12:15 to 13:15

Room C78, Leeuwenborch (building No. 201)


In this study we explore whether the natural resource rents received by the government are affected by upcoming elections. These revenues create a soft budget constraint which give governments the opportunity to expand their public spending without increasing taxes or creating a budget deficit. The findings reported in this paper provide clear evidence that elections raise the share of natural resource rents in the economy. These rents, in turn, are then used to expand the public spending and reduce taxes in an election year to signal the competence of the incumbent government and to secure re-election. It turns out that magnitude and significance of this election effect in part depends on the resource endowment of a country, economic development, the political system in place and the division of the property rights.