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Oiling congress: windfall revenues, institutions, and policy change in the long run

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  • Aldaz Pena, Raul

Abstract

Presidents need to craft political support to push through policy changes. But even when new policies are socially desirable, they are not always politically feasible. This article shows that in resource-rich countries, presidents can use windfall revenues to obtain support for their policy agenda. Using Ecuador as a case study, I show that oil revenues and president led policy changes have the same long-run trends (i.e. both variables are co-integrated); government expenditures link oil revenues and policy change in the short run; and more discretionary budget rules also increase president-led policy changes. In this country, presidents produced policy changes only when they benefited from high oil revenues. These findings contribute to the literature on policymaking in Latin America; they show that the fiscal context in which policymaking institutions operate shapes presidents’ ability to produce policy changes and their long-run patterns. The results also present a framework to study policymaking in resource-rich countries.

Suggested Citation

  • Aldaz Pena, Raul, 2021. "Oiling congress: windfall revenues, institutions, and policy change in the long run," LSE Research Online Documents on Economics 115213, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:115213
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    File URL: http://eprints.lse.ac.uk/115213/
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    References listed on IDEAS

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    1. Pablo T. Spiller & Ernesto H. Stein & Mariano Tommasi & Carlos Scartascini & Lee J. Alston & Marcus André Melo & Bernardo Mueller & Carlos Pereira & Cristóbal Aninat & John Londregan & Patricio Navia , 2008. "Policymaking in Latin America: How Politics Shapes Policies," IDB Publications (Books), Inter-American Development Bank, number 40178 edited by Ernesto H. Stein & Mariano Tommasi & Pablo T. Spiller & Carlos Scartascini, February.
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    5. Ragnar Torvik & Daron Acemoglu & James A. Robinson, 2013. "Why Do Voters Dismantle Checks and Balances? Extensions and Robustness," Working Paper Series 14013, Department of Economics, Norwegian University of Science and Technology.
    6. Campello,Daniela, 2015. "The Politics of Market Discipline in Latin America," Cambridge Books, Cambridge University Press, number 9781107039254, January.
    7. Mark P. Jones, 2017. "How Much Has the Game Changed?: Revisiting Policymaking in Latin America a Decade Later," IDB Publications (Working Papers) 97439, Inter-American Development Bank.
    8. Calvo, Ernesto, 2007. "The Responsive Legislature: Public Opinion and Law Making in a Highly Disciplined Legislature," British Journal of Political Science, Cambridge University Press, vol. 37(2), pages 263-280, April.
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    More about this item

    Keywords

    Ecuador; policy change; oil; institutions;
    All these keywords.

    JEL classification:

    • N0 - Economic History - - General

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