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Does democracy cure a resource curse?

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Abstract

In this paper we utilise a large and reasonably detailed dataset to show that a greater level of democracy in a country's political institutions can alleviate the widely known resource curse. Raw material abundance affects per capita growth negatively, an effect that seems to work through several different channels. Resource-abundant countries have a lower degree of democracy and political rights, and also a lower level of educational attainment. These factors inhibit growth. On the other hand, countries with large extractive industries exhibit high levels of investment. The effects of resource abundance differ for different raw material types, and the largest negative effect on growth appears to come from non-fuel extractive raw materials.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp1804.pdf
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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 18/2004.

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Length: 38 pages
Date of creation: 01 Nov 2004
Date of revision:
Handle: RePEc:hhs:bofitp:2004_018

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Email:
Web page: http://www.suomenpankki.fi/bofit_en/
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Related research

Keywords: economic growth; resource curse; cross-country regression; development; governance; institutions;

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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 0210004, EconWPA.
  2. Papyrakis, E. & Gerlagh, R., 2004. "The resource curse hypothesis and its transmission channels," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3764006, Tilburg University.
  3. Thorvaldur Gylfason & Gylfi Zoega, 2006. "Natural Resources and Economic Growth: The Role of Investment," The World Economy, Wiley Blackwell, vol. 29(8), pages 1091-1115, 08.
  4. Robinson, James A. & Torvik, Ragnar & Verdier, Thierry, 2006. "Political foundations of the resource curse," Journal of Development Economics, Elsevier, vol. 79(2), pages 447-468, April.
  5. Asea, Patrick K. & Lahiri, Amartya, 1999. "The precious bane," Journal of Economic Dynamics and Control, Elsevier, vol. 23(5-6), pages 823-849, April.
  6. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
  7. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  8. Lederman, Daniel & Maloney, William F., 2003. "Trade structure and growth," Policy Research Working Paper Series 3025, The World Bank.
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Citations

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Cited by:
  1. Diego Bastourre, 2008. "Inversores Financieros en los Mercados de Commodities: Un Modelo con Dinámica de Ajuste no Lineal al Equilibrio," Department of Economics, Working Papers 072, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
  2. Stevens, Paul & Dietsche, Evelyn, 2008. "Resource curse: An analysis of causes, experiences and possible ways forward," Energy Policy, Elsevier, vol. 36(1), pages 56-65, January.
  3. Boris Najman & Richard Pomfret & Gael Raballand & Patricia Sourdin, 2005. "How are Oil Revenues Redistributed in an Oil Economy? The Case of Kazakhstan," School of Economics Working Papers 2005-18, University of Adelaide, School of Economics.
  4. Bastourre, Diego, 2008. "Cambio fundamental o especulación financiera en los mercados de commodities? Un modelo con ajuste no lineal al equilibrio
    [Structural break or financial speculation in commodity markets? A multiva
    ," MPRA Paper 9910, University Library of Munich, Germany.

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