IDEAS home Printed from https://ideas.repec.org/p/oxf/oxcrwp/020.html
   My bibliography  Save this paper

Natural Resources, Democracy and Corruption

Author

Listed:
  • Sambit Bhattacharyya
  • Roland Hodler

Abstract

We study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions. Our game-theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor, but not otherwise. We use panel data covering the period 1980-2004 and 124 countries to test this theoretical prediction. Our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions. Our main results hold when we control for the effects of income, time varying common shocks, regional fixed effects and various additional covariates. They are also robust across different samples, and to the use of various alternative measures of natural resources, democracy and corruption.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sambit Bhattacharyya & Roland Hodler, 2009. "Natural Resources, Democracy and Corruption," OxCarre Working Papers 020, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:020
    as

    Download full text from publisher

    File URL: https://ora.ox.ac.uk/objects/uuid:be3b9439-8673-4c56-b508-ab79244c4e4a
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brunnschweiler, Christa N. & Bulte, Erwin H., 2008. "The resource curse revisited and revised: A tale of paradoxes and red herrings," Journal of Environmental Economics and Management, Elsevier, vol. 55(3), pages 248-264, May.
    2. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    3. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies, vol. 22(4), pages 570-615, August.
    4. Hodler, Roland, 2006. "The curse of natural resources in fractionalized countries," European Economic Review, Elsevier, vol. 50(6), pages 1367-1386, August.
    5. Fan, C. Simon & Lin, Chen & Treisman, Daniel, 2009. "Political decentralization and corruption: Evidence from around the world," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 14-34, February.
    6. Bulte Erwin & Damania Richard, 2008. "Resources for Sale: Corruption, Democracy and the Natural Resource Curse," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-30, February.
    7. 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.
    8. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2005. "From Education to Democracy?," American Economic Review, American Economic Association, vol. 95(2), pages 44-49, May.
    9. Collier, Paul & Hoeffler, Anke, 2009. "Testing the neocon agenda: Democracy in resource-rich societies," European Economic Review, Elsevier, vol. 53(3), pages 293-308, April.
    10. Torsten Persson & Guido Tabellini, 2006. "Democracy and Development: The Devil in the Details," American Economic Review, American Economic Association, vol. 96(2), pages 319-324, May.
    11. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April.
    12. Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio & Wacziarg, Romain, 2003. "Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-194, June.
    13. Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
    14. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 158-183, December.
    15. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    16. Bhattacharyya, Sambit, 2009. "Unbundled institutions, human capital and growth," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 106-120, March.
    17. Przeworski,Adam & Alvarez,Michael E. & Cheibub,Jose Antonio & Limongi,Fernando, 2000. "Democracy and Development," Cambridge Books, Cambridge University Press, number 9780521793797.
    18. Philip Keefer, 2007. "Clientelism, Credibility, and the Policy Choices of Young Democracies," American Journal of Political Science, John Wiley & Sons, vol. 51(4), pages 804-821, October.
    19. Przeworski,Adam & Alvarez,Michael E. & Cheibub,Jose Antonio & Limongi,Fernando, 2000. "Democracy and Development," Cambridge Books, Cambridge University Press, number 9780521790321.
    20. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," The World Bank Economic Review, World Bank, vol. 22(2), pages 187-231, June.
    21. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    22. Vicente, Pedro C., 2010. "Does oil corrupt? Evidence from a natural experiment in West Africa," Journal of Development Economics, Elsevier, vol. 92(1), pages 28-38, May.
    23. Bhattacharyya, Sambit & Hodler, Roland, 2010. "Natural resources, democracy and corruption," European Economic Review, Elsevier, vol. 54(4), pages 608-621, May.
    24. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    25. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
    26. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 179-221.
    27. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    28. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
    29. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," The World Bank Economic Review, World Bank, vol. 13(2), pages 333-356, May.
    30. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
    31. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
    32. Paul Collier & Benedikt Goderis, 2007. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," CSAE Working Paper Series 2007-15, Centre for the Study of African Economies, University of Oxford.
    33. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
    34. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
    35. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    36. Plümper, Thomas & Troeger, Vera E., 2007. "Efficient Estimation of Time-Invariant and Rarely Changing Variables in Finite Sample Panel Analyses with Unit Fixed Effects," Political Analysis, Cambridge University Press, vol. 15(2), pages 124-139, April.
    37. Lane, Philip R & Tornell, Aaron, 1996. "Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-241, June.
    38. Søren Johansen & David F. Hendry & Carlos Santos, 2007. "Selecting a Regression Saturated by Indicators," CREATES Research Papers 2007-36, Department of Economics and Business Economics, Aarhus University.
    39. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, September.
    40. Jonathan Isham & Michael Woolcock & Lant Pritchett & Gwen Busby, 2005. "The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth," The World Bank Economic Review, World Bank, vol. 19(2), pages 141-174.
    41. Stephen Knack, 2001. "Aid Dependence and the Quality of Governance: Cross-Country Empirical Tests," Southern Economic Journal, John Wiley & Sons, vol. 68(2), pages 310-329, October.
    42. Collier, Paul & Goderis, Benedikt, 2008. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," MPRA Paper 17315, University Library of Munich, Germany.
    43. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    44. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
    45. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
    46. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    2. Kaznacheev, Peter, 2013. "Resource Rents and Economic Growth: Economic and institutional development in countries with a high share of income from the sale of natural resources. Analysis and recommendations based on internatio," EconStor Research Reports 121950, ZBW - Leibniz Information Centre for Economics.
    3. Adrian Boos & Karin Holm‐Müller, 2012. "A theoretical overview of the relationship between the resource curse and genuine savings as an indicator for “weak” sustainability," Natural Resources Forum, Blackwell Publishing, vol. 36(3), pages 145-159, August.
    4. Dong-Hyeon Kim & Shu-Chin Lin, 2017. "Natural Resources and Economic Development: New Panel Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(2), pages 363-391, February.
    5. Bhattacharyya, Sambit & Hodler, Roland, 2014. "Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions," World Development, Elsevier, vol. 57(C), pages 101-113.
    6. Ruba A. Aljarallah & Andrew Angus, 2020. "Dilemma of Natural Resource Abundance: A Case Study of Kuwait," SAGE Open, , vol. 10(1), pages 21582440198, January.
    7. Brunnschweiler, Christa N., 2008. "Cursing the Blessings? Natural Resource Abundance, Institutions, and Economic Growth," World Development, Elsevier, vol. 36(3), pages 399-419, March.
    8. Brunnschweiler, Christa N. & Bulte, Erwin H., 2008. "The resource curse revisited and revised: A tale of paradoxes and red herrings," Journal of Environmental Economics and Management, Elsevier, vol. 55(3), pages 248-264, May.
    9. Rabah Arezki & Frederick van der Ploeg, 2011. "Do Natural Resources Depress Income Per Capita?," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 504-521, August.
    10. Gvozdeva, Margarita (Гвоздева, Маргарита) & Kazakova, M.V. (Казакова, М.В.) & Kiblitskaya, T.R. (Киблицкая, Т.Р.) & Lyubimov, I.L. (Любимов, И.Л.) & Nesterova, K.V. (Нестерова, К.В.), 2016. "Various Aspects of Natural Resource Wealth Effect on Economic Growth [Различные Аспекты Влияния Богатства Природными Ресурсами На Экономический Рост]," Working Papers 2045, Russian Presidential Academy of National Economy and Public Administration.
    11. Dauvin, Magali & Guerreiro, David, 2017. "The Paradox of Plenty: A Meta-Analysis," World Development, Elsevier, vol. 94(C), pages 212-231.
    12. Blanco, Luisa & Grier, Robin, 2012. "Natural resource dependence and the accumulation of physical and human capital in Latin America," Resources Policy, Elsevier, vol. 37(3), pages 281-295.
    13. Smith, Brock, 2015. "The resource curse exorcised: Evidence from a panel of countries," Journal of Development Economics, Elsevier, vol. 116(C), pages 57-73.
    14. Eregha, P.B. & Mesagan, Ekundayo Peter, 2016. "Oil resource abundance, institutions and growth: Evidence from oil producing African countries," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 603-619.
    15. Eoin McGuirk, 2013. "The illusory leader: natural resources, taxation and accountability," Public Choice, Springer, vol. 154(3), pages 285-313, March.
    16. Collier, Paul & Goderis, Benedikt, 2012. "Commodity prices and growth: An empirical investigation," European Economic Review, Elsevier, vol. 56(6), pages 1241-1260.
    17. Alssadek, Marwan & Benhin, James, 2023. "Natural resource curse: A literature survey and comparative assessment of regional groupings of oil-rich countries," Resources Policy, Elsevier, vol. 84(C).
    18. Cockx, Lara & Francken, Nathalie, 2016. "Natural resources: A curse on education spending?," Energy Policy, Elsevier, vol. 92(C), pages 394-408.
    19. Boschini, Anne & Pettersson, Jan & Roine, Jesper, 2013. "The Resource Curse and its Potential Reversal," World Development, Elsevier, vol. 43(C), pages 19-41.
    20. Carmignani, Fabrizio, 2013. "Development outcomes, resource abundance, and the transmission through inequality," Resource and Energy Economics, Elsevier, vol. 35(3), pages 412-428.

    More about this item

    Keywords

    Natural resources; democracy; political institutions; corruption;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oxf:oxcrwp:020. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Melis Boya (email available below). General contact details of provider: https://edirc.repec.org/data/oxcaruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.