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Natural Resources Wealth, Foreign Aid and Institutions


  • Karim Khan


There is a growing literature on the implications of natural resources and foreign aid for economic development. Different stakeholders have different views regarding the usefulness of these windfall gains. To some, it would enhance investment and productivity in the economy while to others, it is a curse;it would increase rent-seeking and thereby, hamper long run sustainable economic development. This study is the continuation of this debate. The paper, combining the theory of rent-seeking with the availability ofrents, explores the implications of natural resources wealth and the receipts from foreign aid for institutions. Using the cross-country data, we have found that both of these variables have a significant negative effect on the quality of institutional framework. This would be the possible mechanism that can explain the curses of natural resources and foreign aid.

Suggested Citation

  • Karim Khan, 2012. "Natural Resources Wealth, Foreign Aid and Institutions," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 55(1), pages 1-18.
  • Handle: RePEc:eei:journl:v:55:y:2012:i:1:p:1-18

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    Cited by:

    1. Karim Khan, 2015. "Endogenous Institutional Change and Privileged Groups," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(3), pages 171-195.

    More about this item


    Institutional framework; natural resources wealth; foreign aid; sustainable economic development.;

    JEL classification:

    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth


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