Leader Behavior and the Natural Resource Curse

Francesco Caselli and Thomas Cunningham

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We discuss political economy mechanisms which can explain the resource curse, in which an increase in the size of resource rents causes a decrease in the economy's total value added. We identify a number of channels through which resource rents will alter the incentives of a political leader. Some of these induce greater investment by the leader in assets that favour growth (infrastructure, rule of law, etc.), others lead to a potentially catastrophic drop in such activities. As a result, the effect of resource abundance can be highly non-monotonic. We argue that it is critical to understand how resources affect the leader's 'survival function', i.e. the reduced-form probability of retaining power. We also briefly survey decentralised mechanisms, in which rents induce a reallocation of labour by private agents, crowding out productive activity more than proportionately. We argue that these mechanisms cannot be fully understood without simultaneously studying leader behaviour.

Keywords: Natural resource endowment; resource curse; political economy (search for similar items in EconPapers)
JEL-codes: O11 O13 P26 (search for similar items in EconPapers)
Date: 2009-03
New Economics Papers: this item is included in nep-ene and nep-res
References: View complete reference list from CitEc
Citations: View citations in EconPapers (94)

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Journal Article: Leader behaviour and the natural resource curse (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0913

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