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The Curse of Natural Resources in Fractionalized Countries

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Author Info
Roland Hodler

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Abstract

This paper develops a model that can explain why natural resources are a curse for some countries, but not for others. In this model, natural resources cause fighting activities between rivalling groups. Fighting reduces productive activities and weakens property rights, making productive activities even less attractive. The aggregate production decrease exceeds the natural resources' direct positive income effect if and only if the number of rivalling groups is sufficiently large. The model thus predicts that natural resources lower incomes in fractionalized countries, but increase incomes in homogenous countries. Empirical evidence that supports this hypothesis is provided

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Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0404.

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Date of creation: Mar 2004
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Handle: RePEc:ube:dpvwib:dp0404

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Related research
Keywords: Natural resources; Fractionalization; Rent seeking;

Other versions of this item:

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
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
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  2. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2002. "An African Success Story: Botswana," CEPR Discussion Papers 3219, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, vol. 51(2), pages 437-461, August. [Downloadable!] (restricted)
  4. Alberto Alesina & Arnaud Devleeschauwer & William Easterly & Sergio Kurlat & Romain Wacziarg, 2002. "Fractionalization," Harvard Institute of Economic Research Working Papers 1959, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
    • Wacziarg, Romain & Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio, 2002. "Fractionalization," Research Papers 1744, Stanford University, Graduate School of Business. [Downloadable!]
    • Alberto Alesina & Arnaud Devleeschauwer & William Easterly & Sergio Kurlat & Romain Wacziarg, 2003. "Fractionalization," NBER Working Papers 9411, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    • Alesina, Alberto, et al, 2003. " Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-94, June. [Downloadable!] (restricted)
  5. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse: An Illustration from Nigeria," IMF Working Papers 03/139, International Monetary Fund. [Downloadable!]
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  6. Aaron Tornell & Philip R. Lane, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March. [Downloadable!] (restricted)
  7. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Lane, Philip R & Tornell, Aaron, 1996. " Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
  9. North, Douglass C, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter. [Downloadable!] (restricted)
  10. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May. [Downloadable!] (restricted)
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  11. Herschel I. Grossman, 2001. "The Creation of Effective Property Rights," American Economic Review, American Economic Association, vol. 91(2), pages 347-352, May. [Downloadable!] (restricted)
    Other versions:
  12. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christa N. Brunnschweiler & Erwin H. Bulte, 2006. "The Resource Curse Revisited and Revised: A Tale of Paradoxes and Red Herrings," Economics working paper series 06/61, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  2. Rodrigo Fuentes & Roberto Álvarez, 2006. "Paths of Development, Specialization, and Natural Resources Abundance," Working Papers Central Bank of Chile 383, Central Bank of Chile. [Downloadable!]
  3. Christian Bjørnskov, 2007. "Determinants of generalized trust: A cross-country comparison," Public Choice, Springer, vol. 130(1), pages 1-21, January. [Downloadable!] (restricted)
  4. van der Ploeg, Frederick, 2008. "Why Do Many Resource-Rich Countries Have Negative Genuine Saving? Anticipation of Better Times or Rapacious Rent Seeking," CEPR Discussion Papers 7021, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Sambit Bhattacharyya & Roland Hodler, 2008. "Natural Resources, Democracy and Corruption," Department of Economics - Working Papers Series 1047, The University of Melbourne. [Downloadable!]
  6. repec:bep:eapcon:v:8:y:2008:i:1:p:1890-1890 is not listed on IDEAS
  7. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2005. "Globalization and Domestic Conflict," International Trade 0507005, EconWPA. [Downloadable!]
    Other versions:
  8. Roland Hodler, 2007. "Rent seeking and aid effectiveness," International Tax and Public Finance, Springer, vol. 14(5), pages 525-541, October. [Downloadable!] (restricted)
  9. Collier, Paul & Goderis, Benedikt, 2008. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," MPRA Paper 17315, University Library of Munich, Germany. [Downloadable!]
  10. John W. Dawson, 2007. "The Empirical Instituions-Growth Literature: Is Something Amiss at the Top?," Working Papers 07-04, Department of Economics, Appalachian State University. [Downloadable!]
    Other versions:
  11. van der Ploeg, Frederick, 2008. "Genuine Saving and the Voracity Effect," CEPR Discussion Papers 6831, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. Wick, Katharina, 2007. "Conflict and Production: An Application to Natural Resources," Proceedings of the German Development Economics Conference, Göttingen 2007 34, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
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