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Testing the neocon agenda: Democracy in resource-rich societies

  • Collier, Paul
  • Hoeffler, Anke

Resource-rich countries have tended to be autocratic and also have tended to use their resource wealth badly. The neoconservative agenda of promoting democratization in resource-rich countries thus offers the hopeful prospect of a better use of their economic opportunities. This paper examines whether the effect of democracy on economic performance is distinctive in resource-rich societies. We show that a priori the sign of the effect is ambiguous: Resource rents could either enhance or undermine the economic consequences of democracy. We therefore investigate the issue empirically. We first build a new dataset on country-specific resource rents, annually for the period 1970-2001. Using a global panel dataset, we find that in developing countries the combination of high natural resource rents and open democratic systems has been growth-reducing. Checks and balances offset this adverse effect. Thus, resource-rich economies need a distinctive form of democracy with particularly strong checks and balances. Unfortunately, this is rare: Checks and balances are public goods and so are liable to be undersupplied in new democracies. Over time they are eroded by resource rents.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 53 (2009)
Issue (Month): 3 (April)
Pages: 293-308

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Handle: RePEc:eee:eecrev:v:53:y:2009:i:3:p:293-308
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