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Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions

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  • Bhattacharyya, Sambit
  • Hodler, Roland

Abstract

We hypothesize that natural resource revenues may deteriorate contract enforcement if political institutions are weak. As poor contract enforcement leads to low financial development, resource revenues may hinder financial development in countries with poor political institutions, but not in countries with comparatively better political institutions. We provide empirical support for this hypothesis based on within-country variation in our sample covering the period 1970–2005 and 133 countries. Our results are robust to the use of additional control variables, different samples, and alternative measures of financial development and political institutions.

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Article provided by Elsevier in its journal World Development.

Volume (Year): 57 (2014)
Issue (Month): C ()
Pages: 101-113

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Handle: RePEc:eee:wdevel:v:57:y:2014:i:c:p:101-113

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Web page: http://www.elsevier.com/locate/worlddev

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Keywords: natural resources; political institutions; financial development;

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Cited by:
  1. Stolbov, Mikhail, 2013. "The finance-growth nexus revisited: From origins to a modern theoretical landscape," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 7(2), pages 1-22.
  2. Sambit Bhattacharyya & Paul Collier, 2012. "Public Capital in Resource Rich Economies: Is there a curse?," OxCarre Working Papers 065, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  3. Libman, Alexander, 2013. "Natural resources and sub-national economic performance: Does sub-national democracy matter?," Energy Economics, Elsevier, vol. 37(C), pages 82-99.
  4. Sambit Bhattacharyya, 2011. "Political Origins of Financial Structure," Economics Series Working Papers WPS/2011-20, University of Oxford, Department of Economics.

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