The Perils of Unearned Income

Abstract

In addition to the internal risk of deposition, which is modeled using selectorate politics (Bueno de Mesquita et al. 2003), leaders risk being deposed by mass political movements such as revolutions. Leaders reward supporters with either public goods, which reward the whole of society, improve economic productivity, and increase the ability of revolutionaries to organize, or private goods. If confronted with a revolutionary threat then leaders respond by either suppressing public goods—which prevents revolutionaries organizing—or increasing public goods, so citizens have less incentive to rebel. Unearned resources, such as natural resource rents or aid, increase the likelihood of revolutionary onset and effect how leaders best respond to the threat. The results address the resource curse, the potentially pernicious effects of foreign aid and incentives to democratize.