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Politcal Foundations of the Resource Curse

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Listed:
  • James A. Robinson
  • Ragnar Torvik
  • Thierry Verdier

Abstract

In this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse. We show: (1) politicians tend to over-extract natural resources relative to the efficient extraction path because they discount the future too much. (2) resource booms "improve" the efficiency of the extraction path. However, (3), resource booms, by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections, "increase" resource misallocation in the rest of the economy. (4), the overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes. Countries with good institutions tend to benefit from resource booms since these institutions mitigate the perverse political incentives that such booms create. Countries with bad institutions suffer a "resource curse".

Suggested Citation

  • James A. Robinson & Ragnar Torvik & Thierry Verdier, 2003. "Politcal Foundations of the Resource Curse," DELTA Working Papers 2003-33, DELTA (Ecole normale supérieure).
    • Handle: RePEc:del:abcdef:2003-33
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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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