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Natural-Resource Rents and Internal Conflicts - Can Decentralization Lift the Curse?

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  • Mohammad Reza Farzanegan
  • Christian Lessmann
  • Gunther Markwardt

Abstract

We study how natural-resource rents affect the risk of internal conflict within countries and how the federal structure of countries influences this relationship. Natural-resource abundance may induce excessive rent-seeking and thus increase the risk of internal conflict. Fiscal and political decentralization as an institutional arrangement for rent-sharing and political codetermination of regions within a country may limit the destructive effect of the natural-resource rents on internal stability. Using cross-country and panel data covering the period 1984-2004 from more than 90 countries, we find evidence that natural-resource rents indeed increase the risk of internal conflict, but this relationship is significantly mitigated by decentralization.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-03/cesifo1_wp4180.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4180.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4180

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Keywords: natural resources; risk of conflict; decentralization;

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Cited by:
  1. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2014. "Resource Rents, Power, and Political Stability," CESifo Working Paper Series 4727, CESifo Group Munich.
  2. Mohammad Reza Farzanegan & Mohammad Habibpour, 2014. "Direct Distribution of Rents and the Resource Curse in Iran: A Micro-econometric Analysis," CESifo Working Paper Series 4824, CESifo Group Munich.
  3. Mohammad Reza Farzanegan & Mohammad Habibpour, 2014. "Direct Distribution of Rents and the Resource Curse in Iran: A Micro-econometric Analysis," MAGKS Papers on Economics 201425, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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