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Resource Curse and Power Balance: Evidence from Oil-Rich Countries

  • Bjorvatn, Kjetil
  • Farzanegan, Mohammad Reza
  • Schneider, Friedrich

We examine the role of political fractionalization in understanding the “resource curse”. Using panel data for 30 oil-rich countries, we find that the income effect of resource rents is moderated by the political power balance. With a strong government, resource wealth can generate growth even in an environment of poorly developed institutions, while adding oil revenues to a weak government may have damaging effects on the economy. These results have important implications for the economic prospects of the oil-rich countries in the Middle East, which are currently undergoing profound political changes.

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Article provided by Elsevier in its journal World Development.

Volume (Year): 40 (2012)
Issue (Month): 7 ()
Pages: 1308-1316

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Handle: RePEc:eee:wdevel:v:40:y:2012:i:7:p:1308-1316
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