Resource Rents, Political Institutions and Economic Growth

Ibrahim Ahmed Elbadawi and Raimundo Soto

No 413, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: This paper contributes to the empirical literature on oil and other point-source resource curse. We find that the curse does exist but conditional on bad political governance. Unlike previous studies we estimate a flexible econometric growth model that accounts for long-term country heterogeneity and cross-dependency and retains the virtues of the recent literature, including short-run flexibility, cointegration and error-correction mechanisms. We unpack political institutions into those reflecting the degree of inclusiveness (Polity) and credibility of intertemporal commitments (Political Check and Balances) and find that resource-rich countries with low levels on both scores are likely to experience the curse, while those with high enough levels may turn resource rents into a driver of growth. Countries with high scores on only one dimension may avoid the curse but are not likely to effectively use resource rents to promote growth. This suggests that for the oil-rich Arab world to achieve sustained growth, the Arab spring should not only bring democracy, as badly needed as it is, but should also lay the foundations for strong systems of political checks and balances.

Keywords: Oil and natural resource curse; economic growth; democracy; political checks and balances (search for similar items in EconPapers)
JEL-codes: O13 O43 P16 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ene, nep-fdg and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://www.economia.uc.cl/docs/doctra/dt-413.pdf (application/pdf)

Related works:
Working Paper: Resource Rents, Political Institutions and Economic Growth (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:413

Access Statistics for this paper

More papers in Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile. Contact information at EDIRC.
Bibliographic data for series maintained by Jaime Casassus ().