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Resources for Sale: Corruption, Democracy and the Natural Resource Curse

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Author Info

  • Richard Damania

    ()
    (University of Adelaide, Australia)

  • Erwin Bulte

    ()
    (Department of Economics, Tilburg University, Tilburg)

Abstract

A puzzling piece of empirical evidence suggests that resource-abundant countries tend to grow slower than their resource-poor counterparts. We attempt to explain this phenomenon by developing a lobbying game in which rent seeking firms interact with corrupt governments. The presence or absence of political competition, as well as the potential costs of political transitions, turn out to be key elements in generating the ‘resource curse.’ These variables define the degree of freedom that incumbent governments have in pursuing development policies that maximize surplus in the lobbying game, but put the economy off its optimal path. We test our predictions by adding measures of democracy and authoritarianism to existing regression models of the resource curse, and obtain support for our hypotheses.

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File URL: http://www.adelaide.edu.au/cies/papers/0320.pdf
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Bibliographic Info

Paper provided by University of Adelaide, Centre for International Economic Studies in its series Centre for International Economic Studies Working Papers with number 2003-20.

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Length: 41 pages
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:adl:cieswp:2003-20

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Keywords: Resource endowment and economic growth; development; rent seeking; bribing; corruption.;

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References

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  1. Minier, Jenny A, 1998. " Democracy and Growth: Alternative Approaches," Journal of Economic Growth, Springer, vol. 3(3), pages 241-66, September.
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Citations

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Cited by:
  1. Andersen, Jørgen Juel & Aslaksen, Silje, 2008. "Constitutions and the resource curse," Journal of Development Economics, Elsevier, vol. 87(2), pages 227-246, October.
  2. Libman, Alexander, 2013. "Natural resources and sub-national economic performance: Does sub-national democracy matter?," Energy Economics, Elsevier, vol. 37(C), pages 82-99.
  3. Jamal BOUOIYOUR & Refk SELMI & Muhammad SHAHBAZ, 2014. "The Electricity Consumption in a Rentier State: Do Institutions Matter?," Working Papers 2013-2014_12, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Apr 2014.
  4. Sambit Bhattacharyya & Roland Hodler, 2008. "Natural Resources, Democracy and Corruption," Department of Economics - Working Papers Series 1047, The University of Melbourne.
  5. Galinato, Gregmar I. & Galinato, Suzette P., 2013. "The short-run and long-run effects of corruption control and political stability on forest cover," Ecological Economics, Elsevier, vol. 89(C), pages 153-161.
  6. Bulte, Erwin H & Damania, Richard & Deacon, Robert, 2003. "Resource Abundance, Poverty and Development," University of California at Santa Barbara, Economics Working Paper Series qt66z854gv, Department of Economics, UC Santa Barbara.
  7. Goel, Rajeev K. & Korhonen, Iikka, 2011. "Exports and cross-national corruption: A disaggregated examination," Economic Systems, Elsevier, vol. 35(1), pages 109-124, March.
  8. Gregmar Galinato & Suzette Galinato, 2010. "The Effects of Corruption Control and Political Stability on the Environmental Kuznets Curve of Deforestation-Induced Carbon Dioxide Emissions," Working Papers 2010-9, School of Economic Sciences, Washington State University.
  9. Ramin Dadasov & Philipp Harms & Oliver Lorz, 2010. "Financial Integration in Autocracies: Greasing the Wheel or More to Steal?," MAGKS Papers on Economics 201014, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  10. Blanco, Luisa & Grier, Robin, 2012. "Natural resource dependence and the accumulation of physical and human capital in Latin America," Resources Policy, Elsevier, vol. 37(3), pages 281-295.
  11. Egil Matsen & Ragnar Torvik, 2002. "Optimal Dutch Disease," Working Paper Series 2703, Department of Economics, Norwegian University of Science and Technology.
  12. Yao, Yang, 2014. "The Chinese Growth Miracle," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 7, pages 943-1031 Elsevier.
  13. Al-Ubaydli, Omar, 2012. "Natural resources and the tradeoff between authoritarianism and development," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 137-152.
  14. James, Alex & Aadland, David, 2011. "The curse of natural resources: An empirical investigation of U.S. counties," Resource and Energy Economics, Elsevier, vol. 33(2), pages 440-453, May.
  15. Kolstad, Ivar & Wiig, Arne & Williams, Aled, 2009. "Mission improbable: Does petroleum-related aid address the resource curse?," Energy Policy, Elsevier, vol. 37(3), pages 954-965, March.
  16. Carmignani, Fabrizio & Avom, Desire, 2010. "The social development effects of primary commodity export dependence," Ecological Economics, Elsevier, vol. 70(2), pages 317-330, December.

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