Economics at your fingertips  

The Institutional Curse of Natural Resources in the Arab World

Hoda Selim and Chahir Zaki ()

No 890, Working Papers from Economic Research Forum

Abstract: This paper argues that the resource curse in the Arab world is primarily an “institutional curse”, even though it has several macroeconomic manifestations. An empirical investigation, using an augmented growth model, confirms the conditional resource curse hypothesis. The results suggest that on their own; political institutions do not always have an effect on growth but, when these interact with natural resources, they reduce the negative effect of natural resources on growth but do not offset it. The analysis also shows that the curse has operated in different ways within the Arab world. In the GCC, large rents per capita have been utilized to increase government legitimacy and foster regime stability. Indeed, the curse is expressed subtly through a clear segmentation of the labor markets, which acts as an efficient mechanism of rent distribution in the form of well-remunerated public sector jobs and other generous social welfare schemes to national citizens. In contrast, the populous group comprised of poorer rentier states, have experienced conflict, violence and social unrest. Moreover, the limited resources seem to have led to more dire economic consequences; resource busts tend to drive the poor rentier states to engage in excessive borrowing while booms seem to have almost eliminated their manufacturing sectors. Moreover, in a context of low rent per capita, excessive consumption resulted in massive deficiencies in infrastructure investments and an underdeveloped financial sector.

Date: 2014-12, Revised 2014-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Published by The Economic Research Forum (ERF)

Downloads: (external link) (application/pdf) (text/html)

Related works:
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:

Access Statistics for this paper

More papers in Working Papers from Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Sherine Ghoneim ().

Page updated 2019-10-16
Handle: RePEc:erg:wpaper:890