Testing the neocon agenda: Democracy in resource-rich societies

Paul Collier and Anke Hoeffler ()

European Economic Review, 2009, vol. 53, issue 3, pages 293-308

Abstract: Resource-rich countries have tended to be autocratic and also have tended to use their resource wealth badly. The neoconservative agenda of promoting democratization in resource-rich countries thus offers the hopeful prospect of a better use of their economic opportunities. This paper examines whether the effect of democracy on economic performance is distinctive in resource-rich societies. We show that a priori the sign of the effect is ambiguous: Resource rents could either enhance or undermine the economic consequences of democracy. We therefore investigate the issue empirically. We first build a new dataset on country-specific resource rents, annually for the period 1970-2001. Using a global panel dataset, we find that in developing countries the combination of high natural resource rents and open democratic systems has been growth-reducing. Checks and balances offset this adverse effect. Thus, resource-rich economies need a distinctive form of democracy with particularly strong checks and balances. Unfortunately, this is rare: Checks and balances are public goods and so are liable to be undersupplied in new democracies. Over time they are eroded by resource rents.

Keywords: Political; economy; Natural; resources; Growth (search for similar items in EconPapers)
Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:eee:eecrev:v:53:y:2009:i:3:p:293-308

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