Economic Misconceptions and Growth Destrcution in Resource-abundant Democracies

Please enable javascript in your browser.

Alemi, Mohammad Javad | 2022

164 Viewed

Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 55445 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Nili, Masoud
Abstract:
This paper develops a theoretical model based on economic misconceptions to explain the stylized facts of unsatisfactory long-term economic growth rates. Should the economic agents lack sufficient public understanding of economics, office-seeking politicians can take advantage of the situation and adopt populistic policies to get elected into office. Undermined economic growth is the price society pays for its ignorance. This mechanism is most relevant in democratic resource-abundant countries suffering from weak institutions. That is because natural resource price fluctuations make it more challenging to distinguish politicians’ performance and exogenous economic shocks, translating economic fluxes into political instabilities and exacerbating the deleterious effects of misconceptions.As a complement, we examine ‘populism’ from the economic misconceptions standpoint and employ our model to provide an explanation for Dornbusch and Edwards’ (1991) populism cycles as well as why resource-abundant developing countries have been historically more prone to populism.
Keywords:
Democracy ; Economic Growth ; Political Economy ; Natural Resource Curse ; Populism Phenomenon ; Economic Misconceptions