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Institutions and the Resource Curse

Author

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  • Halvor Mehlum
  • Karl Moene
  • Ragnar Torvik

Abstract

Countries rich in natural resources constitute both growth losers and growth winners. We claim that the main reason for these diverging experiences is differences in the quality of institutions. More natural resources push aggregate income down, when institutions are grabber friendly, while more resources raise income, when institutions are producer friendly. We test this theory building on Sachs and Warner's influential works on the resource curse. Our main hypothesis - that institutions are decisive for the resource curse - is confirmed. Our results contrast the claims of Sachs and Warner that institutions do not play a role. Copyright 2006 Royal Economic Society.

Suggested Citation

  • Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    • Handle: RePEc:ecj:econjl:v:116:y:2006:i:508:p:1-20
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    References listed on IDEAS

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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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