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Cursed by resources or institutions?

  • Halvor Mehlum

    ()

    (Department of Economics, University of Oslo, Norway)

  • Karl Ove Moene

    ()

    (Department of Economics, University of Oslo, Norway)

  • Ragnar Torvik

    ()

    (Department of Economics, Norwegian University of Science and Technology)

Natural resource abundant countries constitute both growth losers and growth winners, and the main difference between the success cases and the cases of failure lays in the quality of institutions. With grabber friendly institutions more natural resources push aggregate income down, while with producer friendly institutions more natural resources increase income. Such a theory finds strong support in data. A key question we also discuss is if resources in addition alter the quality of institutions. When that is the case, countries with bad institutions suffer a double resource curse - as the deterioration of institutions strenghtens the negative effect of more natural resources.

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File URL: http://www.svt.ntnu.no/iso/WP/2005/10worldeconomy7.pdf
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Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 5705.

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Length: 26 pages
Date of creation: 25 May 2005
Date of revision:
Handle: RePEc:nst:samfok:5705
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