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Petro Rents, Political Institutions, and Hidden Wealth: Evidence from Offshore Bank Accounts

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  • Jørgen Juel Andersen
  • Niels Johannesen
  • David Dreyer Lassen
  • Elena Paltseva

Abstract

Do political institutions limit rent seeking by politicians? We study the transformation of petroleum rents, almost universally under direct government control, into hidden wealth using unique data on bank deposits in offshore financial centers that specialize in secrecy and asset protection. Our main finding is that plausibly exogenous shocks to petroleum income are associated with significant increases in hidden wealth, but only when institutional checks and balances are weak. The results suggest that around 15% of the windfall gains accruing to petroleum-producing countries with autocratic rulers is diverted to secret accounts. We find very limited evidence that shocks to other types of income not directly controlled by governments affect hidden wealth.

Suggested Citation

  • Jørgen Juel Andersen & Niels Johannesen & David Dreyer Lassen & Elena Paltseva, 2017. "Petro Rents, Political Institutions, and Hidden Wealth: Evidence from Offshore Bank Accounts," Journal of the European Economic Association, European Economic Association, vol. 15(4), pages 818-860.
    • Handle: RePEc:oup:jeurec:v:15:y:2017:i:4:p:818-860.
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    File URL: http://hdl.handle.net/10.1093/jeea/jvw019
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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