Relationship between natural resources and institutions
AbstractThis article analyses through a rent seeking model, the relationship between institutions' quality and natural resources. Depending on the institutions quality, each country has a specific structural capacity to stand natural resources dependency. It is shown that for each country, a threshold exists, such that beyond this point, any additional amounts of natural resources begin to have a negative impact on institutions. As the stock of natural resources increases, this improves the expected profitability of rent seeking, which in turn lowers the quality of institutions. The mechanism comes from a new balance of power within the country. However, the institutional degradation's intensity is determined by social interactions and depends on both the resources nature and their appropriability level. The inverse U-shaped curve obtained from empirical studies presented in this article supports the natural resources non-monotonic effect on institutions found in the model.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number bla08060.
Length: 41 pages
Date of creation: Oct 2008
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Natural resources; institutions; rent seeking.;
Find related papers by JEL classification:
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- F10 - International Economics - - Trade - - - General
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- Felipe Starosta de Waldemar, 2010.
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Documents de travail du Centre d'Economie de la Sorbonne
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