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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 is an established indicator of weak sustainable development that measures the net level of investment a country makes in produced, natural and human capital less depreciation. Maintaining this net level of investment above zero is a necessary condition for sustainable development. However, data demonstrate that resource-rich countries are systematically failing to make this investment. Alongside the familiar resource curse on economic growth, resource abundance has a negative effect on genuine saving. In fact, the two are closely related insofar as future consumption growth is restricted 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 savings that is robust across different estimation procedures.

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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0405012.

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Date of creation: 13 May 2004
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Handle: RePEc:wpa:wuwpdc:0405012

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

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Citations

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Cited by:
  1. Petermann, Andrea & Guzman, Juan Ignacio & Tilton, John E., 2007. "Mining and corruption," Resources Policy, Elsevier, vol. 32(3), pages 91-103, September.
  2. Bjorvatn, Kjetil & Farzanegan, Mohammad Reza, 2013. "Demographic Transition in Resource Rich Countries: A Blessing or a Curse?," World Development, Elsevier, vol. 45(C), pages 337-351.
  3. Eric Neumayer, 2003. "Does the ‘Resource Curse’ hold for Growth in Genuine Income as well?," Others 0312002, EconWPA, revised 18 May 2004.
  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, vol. 46(4), pages 511-537, August.
  5. 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, vol. 37(1), pages 77-93, March.
  6. Sato, Masayuki & Samreth, Sovannroeun, 2008. "Assessing Sustainable Development by Genuine Saving Indicator from Multidimensional Perspectives," MPRA Paper 9996, University Library of Munich, Germany.
  7. 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, vol. 38(C), pages 404-416.
  8. Horatiu A. Rus, 2012. "Environmental Depletion, Governance, and Conflict," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1305-1332, April.
  9. Reynaud, Julien & Vauday, Julien, 2009. "Geopolitics and international organizations: An empirical study on IMF facilities," Journal of Development Economics, Elsevier, vol. 89(1), pages 139-162, May.
  10. 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.

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