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

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  • Mohammad Reza Farzanegan
  • Christian Lessmann
  • Gunther Markwardt

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 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.

Suggested Citation

  • Mohammad Reza Farzanegan & Christian Lessmann & Gunther Markwardt, 2013. "Natural-Resource Rents and Internal Conflicts - Can Decentralization Lift the Curse?," CESifo Working Paper Series 4180, CESifo.
    • Handle: RePEc:ces:ceswps:_4180
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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 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - 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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