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

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  • 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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  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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