More than five years down the line Venezuela had been slipping into an economic cri-sis. An economy wholly dependent on the sale of oil and no diversification of economic production is sure to face such a crisis. The fluctuation in oil prices is sure to hurt the market and the economy. To make matters worse, Venezuela now faces a political crisis with two individuals claiming themselves to be P...

IN THIS APPENDIX, we present some supplementary material. Section B.1 provides the politico-economic microfoundations of the model. Section B.2 provides the derivation of Equation (9). Section B.3 provides the proof of Proposition 2. Section B.4 extends the analysis under CRRA utility. Section B.5 shows the result of numerical analysis using the alternative method of Krusell, Kuruscu, and Smith...