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Corruption, the Resource Curse and Genuine Saving

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  • Simon Dietz
  • Eric Neumayer
  • Indra de Soysa

Abstract

Genuine saving measures net investment in produced, natural and human capital. It is a necessary condition for weak sustainable development that genuine saving not be persistently negative. However, according to data provided by the World Bank, resource-rich countries are systematically failing to meet this condition. Alongside the well-known resource curse on economic growth, resource abundance might have a negative effect on genuine saving. In fact, the two are closely related, as future consumption growth is limited by insufficient genuine saving now. In this paper, we apply the most convincing conclusion from the literature on economic growth – that it is institutional failure that depresses growth – to data on genuine saving. We regress genuine saving on four indicators of institutional quality in interaction with an indicator of resource abundance. The indicators of institutional quality are corruption, bureaucratic quality, the rule of law and political constraints on the executive. We find that reducing corruption has a positive impact on genuine saving in interaction with resource abundance. That is, the negative effect of resource abundance on genuine saving is reduced as corruption is reduced. We find no robust evidence that the other indicators of institutional quality also have an impact on genuine saving.

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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0405010.

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Date of creation: 12 May 2004
Date of revision: 21 Jan 2005
Handle: RePEc:wpa:wuwpdc:0405010

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Keywords: weak sustainability; corruption; institutional quality; resources; curse;

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Citations

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Cited by:
  1. Neumayer, Eric, 2004. "Does the "Resource Curse" hold for Growth in Genuine Income as Well?," World Development, Elsevier, Elsevier, vol. 32(10), pages 1627-1640, October.
  2. Reynaud, Julien & Vauday, Julien, 2009. "Geopolitics and international organizations: An empirical study on IMF facilities," Journal of Development Economics, Elsevier, Elsevier, vol. 89(1), pages 139-162, May.
  3. Liu, Yaobin, 2014. "Is the natural resource production a blessing or curse for China's urbanization? Evidence from a space–time panel data model," Economic Modelling, Elsevier, Elsevier, vol. 38(C), pages 404-416.
  4. Edward Barbier, 2010. "Corruption and the Political Economy of Resource-Based Development: A Comparison of Asia and Sub-Saharan Africa," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 46(4), pages 511-537, August.
  5. Sato, Masayuki & Samreth, Sovannroeun & Sasaki, Kengo, 2013. "The Stability of Sustainable Development Path and Institutions: Evidence from Genuine Savings Indicators," MPRA Paper 48983, University Library of Munich, Germany.
  6. Petermann, Andrea & Guzman, Juan Ignacio & Tilton, John E., 2007. "Mining and corruption," Resources Policy, Elsevier, Elsevier, vol. 32(3), pages 91-103, September.
  7. Horatiu A. Rus, 2012. "Environmental Depletion, Governance, and Conflict," Southern Economic Journal, Southern Economic Association, Southern Economic Association, vol. 78(4), pages 1305-1332, April.
  8. Sato, Masayuki & Samreth, Sovannroeun, 2008. "Assessing Sustainable Development by Genuine Saving Indicator from Multidimensional Perspectives," MPRA Paper 9996, University Library of Munich, Germany.
  9. Azmat Gani, 2012. "The Relationship Between Good Governance And Carbon Dioxide Emissions: Evidence From Developing Economies," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, Chung-Ang Unviersity, Department of Economics, vol. 37(1), pages 77-93, March.
  10. Bjorvatn, Kjetil & Farzanegan, Mohammad Reza, 2013. "Demographic Transition in Resource Rich Countries: A Blessing or a Curse?," World Development, Elsevier, Elsevier, vol. 45(C), pages 337-351.

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