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Natural resource rents and internal conflicts: Can decentralization lift the curse?

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  • Farzanegan, Mohammad Reza
  • Lessmann, Christian
  • Markwardt, Gunther

Abstract

We study how natural resource rents affect the risk of internal conflict within countries and how the federal structure of countries influences this relationship. Natural resource abundance may induce excessive rent-seeking and thus increase the risk of internal conflict. Fiscal and political decentralization as an institutional arrangement for rent-sharing and political codetermination of regions within a country may limit the destructive effect of natural resource rents on internal stability. Using cross-country and panel data from more than 90 countries covering the period 1984–2004, we find evidence that natural resource rents indeed increase the risk of internal conflict, but this relationship is significantly mitigated by political decentralization.

Suggested Citation

  • Farzanegan, Mohammad Reza & Lessmann, Christian & Markwardt, Gunther, 2018. "Natural resource rents and internal conflicts: Can decentralization lift the curse?," Economic Systems, Elsevier, vol. 42(2), pages 186-205.
  • Handle: RePEc:eee:ecosys:v:42:y:2018:i:2:p:186-205
    DOI: 10.1016/j.ecosys.2017.05.009
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    Cited by:

    1. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2014. "Resource Rents, Power, and Political Stability," CESifo Working Paper Series 4727, CESifo.
    2. Gary Flomenhoft, 2018. "Historical and Empirical Basis for Communal Title in Minerals at the National Level: Does Ownership Matter for Human Development?," Sustainability, MDPI, vol. 10(6), pages 1-27, June.
    3. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2015. "Natural-Resource Rents and Political Stability in the Middle East and North Africa," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(3), pages 33-37, October.
    4. Mohammad Reza Farzanegan & Stefan Witthuhn, 2014. "Demographic Transition and Political Stability: Does Corruption Matter?," CESifo Working Paper Series 5133, CESifo.
    5. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2015. "Natural-Resource Rents and Political Stability in the Middle East and North Africa," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(03), pages 33-37, October.
    6. Christian Lessmann & Arne Steinkraus, 2017. "The Geography of Natural Resources, Ethnic Inequality and Development," CESifo Working Paper Series 6299, CESifo.
    7. GU, Jianqiang & Umar, Muhammad & Soran, Semih & Yue, Xiao-Guang, 2020. "Exacerbating effect of energy prices on resource curse: Can research and development be a mitigating factor?," Resources Policy, Elsevier, vol. 67(C).
    8. Phuc Canh, Nguyen & Trung Thong, Nguyen, 2020. "Nexus between financialisation and natural resources rents: Empirical evidence in a global sample," Resources Policy, Elsevier, vol. 66(C).
    9. repec:ces:ifodic:v:13:y:2015:i:3:p:19173861 is not listed on IDEAS
    10. Driouchi, Ahmed & Harkat, Tahar, 2016. "Knowledge Economy, Global Innovation Indices, Rents and Governance in Arab Economies," MPRA Paper 73507, University Library of Munich, Germany.
    11. Mohammad Reza Farzanegan & Tim Krieger, 2018. "Oil Rents Shocks and Inequality in Iran," CESifo Working Paper Series 6876, CESifo.
    12. Mohammad Reza Farzanegan & Mohammad Habibpour, 2014. "Direct Distribution of Rents and the Resource Curse in Iran: A Micro-econometric Analysis," CESifo Working Paper Series 4824, CESifo.
    13. Armey, Laura E. & McNab, Robert M., 2018. "Expenditure decentralization and natural resources," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 52-61.
    14. Miller, Rebecca, 2015. "Natural resource extraction and political trust," Resources Policy, Elsevier, vol. 45(C), pages 165-172.
    15. Anser, Muhammad Khalid & Yousaf, Zahid & Nassani, Abdelmohsen A. & Vo, Xuan Vinh & Zaman, Khalid, 2020. "Evaluating ‘natural resource curse’ hypothesis under sustainable information technologies: A case study of Saudi Arabia," Resources Policy, Elsevier, vol. 68(C).
    16. Do, Trung K., 2021. "Resource curse or rentier peace? The impact of natural resource rents on military expenditure," Resources Policy, Elsevier, vol. 71(C).
    17. Mohammad Reza Farzanegan & Tim Krieger, 2018. "Oil Revenues Shocks and Inequality in Iran," Working Papers 1226, Economic Research Forum, revised 18 Sep 2018.

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    More about this item

    Keywords

    Natural resources; Risk of conflict; Decentralization;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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