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Diamonds Are a Rebel’s Best Friend

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  • Olsson, Ola

    ()
    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

Many countries that produce rough diamond have experienced a highly adverse pattern of economic development. In this article, we propose that the primary reason for the negative impact is that diamonds easily become the prize in predatory struggles between loot-seeking rebels and more or less kleptocratic governments. In weakly institutionalized countries like Angola, Democratic Republic of the Congo, and Sierra Leone, this theory works well, but it does not explain the impressive growth record of diamond-rich Botswana and Namibia. For a deeper understanding of these countries’ success, we point at the crucial differences between kimberlite and alluvial mining and the effect of having the world leading firm De Beers as a partner. Indeed, we argue that in countries like Angola, diamonds can never be a major vehicle for sustained growth, although the ongoing Kimberley process for eliminating conflict diamonds probably has contributed to making several African countries more stable.

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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 156.

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Length: 22 pages
Date of creation: 30 Dec 2004
Date of revision:
Handle: RePEc:hhs:gunwpe:0156

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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Keywords: diamonds; rebels; social conflict; Kimberley process; alluvial mining; development;

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References

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  1. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
  2. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2002. "Institutions and the resource curse," Development and Comp Systems 0210003, EconWPA.
  3. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  4. Guidolin, Massimo & La Ferrara, Eliana, 2004. "Diamonds are Forever, Wars are Not: Is Conflict Bad for Private Firms?," CEPR Discussion Papers 4668, C.E.P.R. Discussion Papers.
  5. Congdon Fors, Heather & Olsson, Ola, 2005. "Endogenous Institutional Change After Independence," Working Papers in Economics 163, University of Gothenburg, Department of Economics.
  6. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
  7. Olsson, Ola & Congdon, Heather, 2003. "Congo: The Prize of Predation," Working Papers in Economics 97, University of Gothenburg, Department of Economics, revised 30 Oct 2003.
  8. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
  9. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September.
  10. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2002. "An African Success Story: Botswana," CEPR Discussion Papers 3219, C.E.P.R. Discussion Papers.
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Cited by:
  1. Congdon Fors, Heather & Olsson, Ola, 2005. "Endogenous Institutional Change After Independence," Working Papers in Economics 163, University of Gothenburg, Department of Economics.
  2. Maconachie, Roy, 2009. "Diamonds, governance and 'local' development in post-conflict Sierra Leone: Lessons for artisanal and small-scale mining in sub-Saharan Africa?," Resources Policy, Elsevier, vol. 34(1-2), pages 71-79.
  3. Carl-Johan Dalgaard & Ola Olsson, 0. "Windfall Gains, Political Economy and Economic Development," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 17(suppl_1), pages -109.
  4. Al-Ubaydli, Omar & McCabe, Kevin & Twieg, Peter, 2014. "Can more be less? An experimental test of the resource curse," MPRA Paper 55381, University Library of Munich, Germany.
  5. Thorvaldur Gylfason, 2011. "Natural Resource Endowment: A Mixed Blessing?," CESifo Working Paper Series 3353, CESifo Group Munich.
  6. Olsson, Ola & Hansson, Gustav, 2011. "Country size and the rule of law: Resuscitating Montesquieu," European Economic Review, Elsevier, vol. 55(5), pages 613-629, June.
  7. Graham Davis, 2011. "The resource drag," International Economics and Economic Policy, Springer, vol. 8(2), pages 155-176, June.
  8. 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.
  9. Gylfason, Thorvaldur, 2008. "Development and Growth in Mineral-Rich Countries," CEPR Discussion Papers 7031, C.E.P.R. Discussion Papers.
  10. Shahida Wizarat, 2013. "Natural Resources, Conflict and Growth Nexus," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(8), pages 1063-1082, August.

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