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Diamonds Are a Rebel's Best Friend

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  • Ola Olsson

Abstract

Many countries that produce rough diamonds have experienced a highly adverse pattern of economic development. In this article, we propose that the primary reason for the negative impact is that diamonds easily become the prize in predatory struggles between loot-seeking rebels and more or less kleptocratic governments. In weakly institutionalised countries like Angola, the Democratic Republic of Congo and Sierra Leone, this theory works well, but it does not explain the impressive growth record of diamond-rich Botswana and Namibia. For a deeper understanding of these countries' success, we point at the crucial differences between kimberlite and alluvial mining and the effect of having the world-leading firm De Beers as a partner. Indeed, we argue that in countries like Angola, diamonds can never be a major vehicle for sustained growth, although the ongoing Kimberley process for eliminating conflict diamonds probably has contributed to making several African countries more stable. Copyright 2006 The Author Journal compilation 2006 Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 29 (2006)
Issue (Month): 8 (08)
Pages: 1133-1150

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Handle: RePEc:bla:worlde:v:29:y:2006:i:8:p:1133-1150

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References

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  1. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2002. "Institutions and the resource curse," GE, Growth, Math methods, EconWPA 0210004, EconWPA.
  2. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, American Economic Association, vol. 81(4), pages 912-21, September.
  3. Olsson, Ola & Congdon, Heather, 2003. "Congo: The Prize of Predation," Working Papers in Economics, University of Gothenburg, Department of Economics 97, University of Gothenburg, Department of Economics, revised 30 Oct 2003.
  4. Congdon Fors, Heather & Olsson, Ola, 2007. "Endogenous institutional change after independence," European Economic Review, Elsevier, Elsevier, vol. 51(8), pages 1896-1921, November.
  5. Guidolin, Massimo & La Ferrara, Eliana, 2004. "Diamonds are Forever, Wars are Not: Is Conflict Bad for Private Firms?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4668, C.E.P.R. Discussion Papers.
  6. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2002. "An African Success Story: Botswana," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3219, C.E.P.R. Discussion Papers.
  7. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  8. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, Elsevier, vol. 45(4-6), pages 847-859, May.
  9. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
  10. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, Elsevier, vol. 45(4-6), pages 827-838, May.
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Cited by:
  1. Congdon Fors, Heather & Olsson, Ola, 2007. "Endogenous institutional change after independence," European Economic Review, Elsevier, Elsevier, vol. 51(8), pages 1896-1921, November.
  2. Shahida Wizarat, 2013. "Natural Resources, Conflict and Growth Nexus," Asian Economic and Financial Review, Asian Economic and Social Society, Asian Economic and Social Society, vol. 3(8), pages 1063-1082, August.
  3. Olsson, Ola & Hansson, Gustav, 2011. "Country size and the rule of law: Resuscitating Montesquieu," European Economic Review, Elsevier, Elsevier, vol. 55(5), pages 613-629, June.
  4. Gylfason, Thorvaldur, 2008. "Development and Growth in Mineral-Rich Countries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7031, C.E.P.R. Discussion Papers.
  5. Al-Ubaydli, Omar, 2012. "Natural resources and the tradeoff between authoritarianism and development," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 81(1), pages 137-152.
  6. Dalgaard, Carl-Johan & Olsson, Ola, 2006. "Windfall Gains, Political Economy, and Economic Development," Working Papers in Economics, University of Gothenburg, Department of Economics 223, University of Gothenburg, Department of Economics.
  7. Maconachie, Roy, 2009. "Diamonds, governance and 'local' development in post-conflict Sierra Leone: Lessons for artisanal and small-scale mining in sub-Saharan Africa?," Resources Policy, Elsevier, Elsevier, vol. 34(1-2), pages 71-79.
  8. Graham Davis, 2011. "The resource drag," International Economics and Economic Policy, Springer, Springer, vol. 8(2), pages 155-176, June.
  9. Thorvaldur Gylfason, 2011. "Natural Resource Endowment: A Mixed Blessing?," CESifo Working Paper Series 3353, CESifo Group Munich.
  10. Al-Ubaydli, Omar & McCabe, Kevin & Twieg, Peter, 2014. "Can more be less? An experimental test of the resource curse," MPRA Paper 55381, University Library of Munich, Germany.

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