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Resource Curse and Power Balance: Evidence from Iran

Author

Listed:
  • Bjorvatn Kjetil

    (NHH Norwegian School of Economics, Bergen, Norway)

  • Farzanegan Mohammad Reza

    (Department of the Middle East Economics, Philipps-University of Marburg, Center for Near and Middle Eastern Studies (CNMS), MACIE & CESifo, Marburg, Germany)

  • Schneider Friedrich

    (Department of Economics, University of Linz, Linz, Austria)

Abstract

Empirical research shows that natural resources have a detrimental effect on economic growth, a phenomenon known as the “resource curse”. Competition between influence groups for access to the resource rents, that is, rent-seeking, is often blamed for this curse. In this article, we dig deeper into the link between political competition and the resource curse by studying the case of Iran from 1960 to 2007. We present a theoretical model demonstrating how the effect of rents on the economy depends on the balance of political power. The model shows that an increase in rents may lead to a sharp reduction in income when the distribution of power between influence groups is relatively balanced. The empirical evidence confirms the predictions of the model.

Suggested Citation

  • Bjorvatn Kjetil & Farzanegan Mohammad Reza & Schneider Friedrich, 2013. "Resource Curse and Power Balance: Evidence from Iran," Review of Middle East Economics and Finance, De Gruyter, vol. 9(2), pages 133-158, August.
    • Handle: RePEc:bpj:rmeecf:v:9:y:2013:i:2:p:133-158:n:4
    DOI: 10.1515/rmeef-2012-0029
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    References listed on IDEAS

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    1. Christopher F Baum, 2006. "An Introduction to Modern Econometrics using Stata," Stata Press books, StataCorp LLC, number imeus, July.
    2. Barro, Robert J, 1996. "Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
    3. Andersen, Jørgen Juel & Aslaksen, Silje, 2008. "Constitutions and the resource curse," Journal of Development Economics, Elsevier, vol. 87(2), pages 227-246, October.
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    More about this item

    Keywords

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    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 - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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