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Institutions and the resource curse

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Countries rich in natural resources constitute both growth losers and growth winners. We claim that the main reason for these diverging experiences is differences in the quality of institutions. More natural resources push aggregate income down, when institutions are grabber friendly, while more resources raise income, when institutions are producer friendly. We test this theory building on Sachs and Warner.s influential works on the resource curse. Our main hypothesis: that institutions are decisive for the resource curse, is conÞrmed. Our results are in sharp contrast to the claim by Sachs and Warner that institutions do not play a role.

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  • Mehlum, Halvor & Moene, Karl-Ove & Torvik, Ragnar, 2003. "Institutions and the resource curse," Memorandum 29/2002, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2002_029
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    More about this item

    Keywords

    Natural resources; Institutional quality; Growth; Rent-seeking;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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