Rent Seekers in Rentier States: When Greed Brings Peace

16 Pages Posted: 23 Sep 2010

See all articles by Kjetil Bjorvatn

Kjetil Bjorvatn

Norwegian School of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute)

Alireza Naghavi

University of Bologna - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 2, 2009

Abstract

Are natural resources a source of conflict or stability? Empirical studies demonstrate that rents from natural resources, and in particular oil, are an important source of civil war. Allegedly, resource rents attract rent seekers, which destabilize society. However, there is a large literature on how so-called rentier states manage to pacify opposition groups by handing out special favors. The present paper attempts to bridge the gap between the rent-seeking view of resource rents as a source of conflict and the rentier state view which emphasizes the role of resource rents in promoting peace and stability, and show how one may lead to the other. The mechanism that we highlight relies on the notion that higher rents may activate more interest groups in a power struggle. We demonstrate that the associated increased cost of conflict may in fact promote social stability. The peaceful solution is upheld by a self reinforcing transfer program, in the form of patronage employment. The chance of conflict and rent dissipation in our model is highest for intermediate levels of resource rents, where the government cannot make credible commitments to the opposition groups.

Keywords: Rent seeking, rentier states, resource rents, conflict, patronage employment

JEL Classification: D74, Q34

Suggested Citation

Bjorvatn, Kjetil and Naghavi, Alireza, Rent Seekers in Rentier States: When Greed Brings Peace (December 2, 2009). Available at SSRN: https://ssrn.com/abstract=1680827 or http://dx.doi.org/10.2139/ssrn.1680827

Kjetil Bjorvatn (Contact Author)

Norwegian School of Economics and Business Administration ( email )

Helleveien 30
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Norway
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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

Alireza Naghavi

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

HOME PAGE: http://alirezanaghavi.altervista.org/

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