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Diamonds Are a Rebel’s Best Friend

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  • Olsson, Ola

    () (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

Many countries that produce rough diamond have experienced a highly adverse pattern of economic development. In this article, we propose that the primary reason for the negative impact is that diamonds easily become the prize in predatory struggles between loot-seeking rebels and more or less kleptocratic governments. In weakly institutionalized countries like Angola, Democratic Republic of the Congo, and Sierra Leone, this theory works well, but it does not explain the impressive growth record of diamond-rich Botswana and Namibia. For a deeper understanding of these countries’ success, we point at the crucial differences between kimberlite and alluvial mining and the effect of having the world leading firm De Beers as a partner. Indeed, we argue that in countries like Angola, diamonds can never be a major vehicle for sustained growth, although the ongoing Kimberley process for eliminating conflict diamonds probably has contributed to making several African countries more stable.

Suggested Citation

  • Olsson, Ola, 2004. "Diamonds Are a Rebel’s Best Friend," Working Papers in Economics 156, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0156
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    References listed on IDEAS

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    1. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    2. Ola Olsson & Heather Congdon Fors, 2004. "Congo: The Prize of Predation," Journal of Peace Research, Peace Research Institute Oslo, vol. 41(3), pages 321-336, May.
    3. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
    4. Massimo Guidolin & Eliana La Ferrara, 2007. "Diamonds Are Forever, Wars Are Not: Is Conflict Bad for Private Firms?," American Economic Review, American Economic Association, vol. 97(5), pages 1978-1993, December.
    5. Congdon Fors, Heather & Olsson, Ola, 2007. "Endogenous institutional change after independence," European Economic Review, Elsevier, vol. 51(8), pages 1896-1921, November.
    6. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-1288, December.
    7. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2002. "An African Success Story: Botswana," CEPR Discussion Papers 3219, C.E.P.R. Discussion Papers.
    8. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
    9. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
    10. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-921, September.
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    Cited by:

    1. Al-Ubaydli, Omar & McCabe, Kevin & Twieg, Peter, 2014. "Can More Be Less? An Experimental Test of the Resource Curse," Journal of Experimental Political Science, Cambridge University Press, vol. 1(01), pages 39-58, March.
    2. Olsson, Ola & Hansson, Gustav, 2011. "Country size and the rule of law: Resuscitating Montesquieu," European Economic Review, Elsevier, vol. 55(5), pages 613-629, June.
    3. Knobel, Alexander, 2013. "The risks of fiscal policy in countries rich in natural resources," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, pages 29-38, October.
    4. Carl-Johan Dalgaard & Ola Olsson, 0. "Windfall Gains, Political Economy and Economic Development," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 17(suppl_1), pages -109.
    5. Maconachie, Roy, 2009. "Diamonds, governance and 'local' development in post-conflict Sierra Leone: Lessons for artisanal and small-scale mining in sub-Saharan Africa?," Resources Policy, Elsevier, vol. 34(1-2), pages 71-79.
    6. Congdon Fors, Heather & Olsson, Ola, 2007. "Endogenous institutional change after independence," European Economic Review, Elsevier, vol. 51(8), pages 1896-1921, November.
    7. Leonid V. Azarnert, 2016. "Trade, Luxury Goods and a Growth Enhancing Tariff," CESifo Working Paper Series 5943, CESifo Group Munich.
    8. Prof. Dr Shahida Wizarat, 2014. "Natural Resources, Conflict and Growth: Uncovering the Transmission Mechanism," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(8), pages 987-1000, August.
    9. Al-Ubaydli, Omar, 2012. "Natural resources and the tradeoff between authoritarianism and development," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 137-152.
    10. Thorvaldur Gylfason, 2011. "Natural Resource Endowment: A Mixed Blessing?," CESifo Working Paper Series 3353, CESifo Group Munich.
    11. Gylfason, Thorvaldur, 2008. "Development and Growth in Mineral-Rich Countries," CEPR Discussion Papers 7031, C.E.P.R. Discussion Papers.
    12. Shahida Wizarat, 2013. "Natural Resources, Conflict and Growth Nexus," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(8), pages 1063-1082, August.
    13. Graham Davis, 2011. "The resource drag," International Economics and Economic Policy, Springer, vol. 8(2), pages 155-176, June.
    14. Eregha, P.B. & Mesagan, Ekundayo Peter, 2016. "Oil resource abundance, institutions and growth: Evidence from oil producing African countries," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 603-619.

    More about this item

    Keywords

    diamonds; rebels; social conflict; Kimberley process; alluvial mining; development;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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