Job Market Paper:

Economic Foundation of Dictatorship in Resource Exporting Economies (May 2010) 
  • Abstract: This paper explains the lack of democratization in resource exporting countries using a two period resource extraction model. There are two classes of agents: elite who own capital and natural resources and citizens who own labor. The elite announce, in the first period, their plans for resource extraction and investment in the economy. Citizens, in the second period, decide whether to conduct a revolution against elite to capture their share of rents from un-extracted resources. Government policies are designed to ensure that the elite remain in power and that citizens do not have the incentive to revolt. These policies subsidize extraction and investment during the first period. The extraction subsidy reduces the benefit of revolution while the investment subsidy increases its cost. On the other hand, policies in the democracy case are not constrained by the revolution threat and represent the median voter preferences. The resource is over extracted in the non-democratic case compared to the democratic case. Also, investment in the non-resource sector is lower. The important finding of the model is that extraction path goes against price signals; first period extraction increases with the increase of the resource price in the second period. Non-Democratic institution is the rational choice of the elite even with the costly policies to prevent a revolution. 
           (Link to paper)

Choice of Market Instruments with Strategic Firms (May 2008)
  • Abstract: The superiority of price over quantity instruments for pollution abatement, especially for the case of global warming, has gained support in the literature since the seminal work of Weitzman (1974). However, industry and politicians seem to prefer cap and trade schemes. This paper explains this preference by investigating the strategic behavior of firms and its effect on influencing the choice of a market instrument over the other. In the first period, firms have the strategic incentive to signal an artificial marginal cost schedule to the regulator. The regulator’s problem is to select the appropriate market instrument to minimize social welfare loss. In the second period, firms benefit from lower abatement costs and generous permits and or lower taxes. Firms’ informational advantage and strategic behavior yield a sub-optimal outcome than the case of non-strategic firms. Firms with low marginal costs will behave so that the regulator chooses a quota instrument; whereas the high cost firms would prefer the price instrument.

Do Tariffs on Oil Generate Political Transition?  (August 2010)
  • Abstract: The model consists of two games. The first one is between the resource importing country which chooses an optimal tariff and the resource exporting country which chooses the extraction quantities for its domestic market and for the export market. The second game takes place in the resource exporting country between two classes of agents in the economy: elites who own the resource and citizens who have labor income. The outcome of the second game determines if political transition is taking place or not. If the income tax rate set by the government is closer to the preferred tax rate of citizens then it is an indication that citizens are gaining more political power. If, however, the tax rate is closer to the preferred rate of elites then there is no change in political power. Tariff imposed on oil causes a shift of oil production from export market to domestic market. Compared to the non-tariff case, the re-allocation of oil production reduces the political conflict between the two classes of agents.