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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 Group Munich.
  • Handle: RePEc:ces:ceswps:_4180
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    Citations

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    Cited by:

    1. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2015. "Natural-Resource Rents and Political Stability in the Middle East and North Africa," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(3), pages 33-37, October.
    2. Miller, Rebecca, 2015. "Natural resource extraction and political trust," Resources Policy, Elsevier, vol. 45(C), pages 165-172.
    3. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2014. "Resource Rents, Power, and Political Stability," CESifo Working Paper Series 4727, CESifo Group Munich.
    4. Mohammad Reza Farzanegan & Stefan Witthuhn, 2014. "Demographic Transition and Political Stability: Does Corruption Matter?," CESifo Working Paper Series 5133, CESifo Group Munich.
    5. repec:ces:ifodic:v:13:y:2015:i:3:p:19173861 is not listed on IDEAS
    6. Christian Leßmann & Arne Steinkraus, 2017. "The Geography of Natural Resources, Ethnic Inequality and Development," CESifo Working Paper Series 6299, CESifo Group Munich.
    7. repec:gam:jsusta:v:10:y:2018:i:6:p:1958-:d:151849 is not listed on IDEAS
    8. Driouchi, Ahmed & Harkat, Tahar, 2016. "Knowledge Economy, Global Innovation Indices, Rents and Governance in Arab Economies," MPRA Paper 73507, University Library of Munich, Germany.
    9. Mohammad Reza Farzanegan & Mohammad Habibpour, 2014. "Direct Distribution of Rents and the Resource Curse in Iran: A Micro-econometric Analysis," CESifo Working Paper Series 4824, CESifo Group Munich.

    More about this item

    Keywords

    natural resources; risk of conflict; decentralization;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; 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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