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Natural-Resource Rents and Internal Conflicts - Can Decentralization Lift the Curse?

  • Mohammad Reza Farzanegan
  • Christian Lessmann
  • Gunther Markwardt

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 the natural-resource rents on internal stability. Using cross-country and panel data covering the period 1984-2004 from more than 90 countries, we find evidence that natural-resource rents indeed increase the risk of internal conflict, but this relationship is significantly mitigated by decentralization.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4180.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4180
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