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Political incentives of the resource booms

Author

Listed:
  • James A. Robinson

    (Department of Government - Harvard University)

  • Ragnar Torvik

    (Department of Economics - NTNU - Norwegian University of Science and Technology [Trondheim] - NTNU - Norwegian University of Science and Technology)

  • Thierry Verdier

    (DELTA - Département et Laboratoire d'Economie Théorique et Appliquée - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

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, and (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 institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create. Countries without such institutions however may suffer from a resource curse.

Suggested Citation

  • James A. Robinson & Ragnar Torvik & Thierry Verdier, 2006. "Political incentives of the resource booms," Post-Print halshs-00754164, HAL.
    • Handle: RePEc:hal:journl:halshs-00754164
    DOI: 10.1016/j.jdeveco.2006.01.008
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    Cited by:

    1. Chernor Momodu Bah & Mohamed Ouedraogo, 2022. "The Effect of Natural Resources on Economic Growth in West Africa: The Mediating Role of Human Capital Disaggregation," Journal of Contemporary Research in Business, Economics and Finance, Learning Gate, vol. 4(2), pages 27-42.

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