Diamonds are a dictator's best friend: Natural resources and the tradeoff between development and authoritarianism

This dissertation seeks to simultaneously answer three questions: (1) What is the causal link between democracy and economic development? (2) Why might elites in an authoritarian regime pay an economic cost when they repress their subjects' ability to overthrow them, a cost that may make them limit this repression? (3) Why might natural resources have a negative effect on economic development and on prospects for democracy?;We build a game-theoretic model where a country's economic performance and the probability of it democratising both depend upon its population's capacity to coordinate their actions. By increasing the value of being in power, natural resources make dictators more willing to repress their subjects' coordination capability. The model predicts that natural resource income decreases economic performance in authoritarian regimes but not in democracies. Further, the probability of an authoritarian regime democratising decreases as natural resource income increases. We test these predictions using international data on mining and quarrying income in a cross-sectional panel and a diff-diff analysis. The empirical results are generally consistent with the theory.