Fragmented authority and the fiscal commons: the political economy of post-2011 Libya

This paper argues that Libya’s post-2011 political economy is best understood not as fiscal collapse, but as distorted state expansion under fragmented authority. The revolution broke centralised political rule while leaving the core hydrocarbon-financed revenue-collection mechanism largely intact: hydrocarbon revenues continued to be mediated nationally through the Central Bank of Libya and used to fund salaries, subsidies and transfers across political and territorial divides. To explain this paradox, the paper develops a simple N-claimant common-pool model in which fragmented actors over-claim from a centralised hydrocarbon pool while internalising only part of the aggregate fiscal cost. The model predicts a bias towards rising recurrent claims, weaker expenditure discipline, greater rent extraction, and declining state capacity. The empirical analysis combines institutional evidence, fiscal-composition data and synthetic control estimates for 2002–2024. Because the 2011 rupture bundled revolution, civil war, oil disruption and institutional contestation, the synthetic control estimates identify Libya’s aggregate post-2011 divergence rather than a mechanism-specific treatment effect; the common-pool interpretation is therefore assessed through triangulation. The results show that, relative to a synthetic counterfactual, Libya experienced a sharp fragmentation of political authority and deterioration in political stability, but no comparable collapse in natural resource rents. Government expenditure rose, wages and subsidies crowded out development spending, and indicators of the control of corruption and the existence of an impartial public administration deteriorated. The evidence supports the claim that Libya became a larger but less capable fiscal state: persistent revenue pooling sustained distributive expansion while weakening expenditure discipline and public policy implementation.