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Corruption, Development and the Curse of Natural Resources

Shannon Pendergast, Judith Clarke () and Gerrit van Kooten

No 2008-10, Working Papers from University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group

Abstract: In 1995, Jeffrey Sachs and Andrew Warner found a negative relationship between natural resources and economic growth, and claimed that natural resources are a curse. Their work has been widely cited, with many economists now accepting the curse of natural resources as a welldocumented explanation of poor economic growth in some economies (e.g., Papyrakis and Gerlagh, 2004; Kronenberg, 2004). In this paper, we provide an alternative econometric framework for evaluating this claim, although we begin with a discussion of possible explanations for the curse and a critical assessment of the extant theory underlying the curse. Our approach is to identify natural resources that have the greatest rents and potential for exploitation through rent-seeking agents. The transmission mechanism that we specify works through the effect that rent seeking has on corruption and how that, in turn, impacts wellbeing. Our measure of wellbeing is the Human Development Index, although we find similar results for per capita GDP. While we find that resource abundance does not directly impact economic development, we do find that petroleum resources are associated with rent-seeking behavior that negatively affects wellbeing. Our regression results are robust to various model specifications and sensitivity analyses.

Keywords: natural resource curse; petroleum resources; unbalanced panels and GMM estimation (search for similar items in EconPapers)
JEL-codes: O12 O43 O47 Q32 Q34 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2008-07
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-res
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