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Corruption, the Resource Curse and Genuine Saving

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Author Info
Simon Dietz
Eric Neumayer
Indra de Soysa

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

Other versions of this item:

Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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References listed on IDEAS
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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. Sato, Masayuki & Samreth, Sovannroeun, 2008. "Assessing Sustainable Development by Genuine Saving Indicator from Multidimensional Perspectives," MPRA Paper 9996, University Library of Munich, Germany. [Downloadable!]
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