Corruption, the Resource Curse and Genuine Saving

Simon Dietz, Eric Neumayer and Indra de Soysa

Development and Comp Systems from University Library of Munich, Germany

Abstract: Genuine saving measures net investment in produced, natural and human capital. It is a necessary condition for weak sustainable development that genuine saving not be persistently negative. However, according to data provided by the World Bank, resource-rich countries are systematically failing to meet this condition. Alongside the well-known resource curse on economic growth, resource abundance might have a negative effect on genuine saving. In fact, the two are closely related, as future consumption growth is limited by insufficient genuine saving now. In this paper, we apply the most convincing conclusion from the literature on economic growth – that it is institutional failure that depresses growth – to data on genuine saving. We regress genuine saving on four indicators of institutional quality in interaction with an indicator of resource abundance. The indicators of institutional quality are corruption, bureaucratic quality, the rule of law and political constraints on the executive. We find that reducing corruption has a positive impact on genuine saving in interaction with resource abundance. That is, the negative effect of resource abundance on genuine saving is reduced as corruption is reduced. We find no robust evidence that the other indicators of institutional quality also have an impact on genuine saving.

Keywords: weak sustainability; corruption; institutional quality; resources; curse (search for similar items in EconPapers)
JEL-codes: E21 E60 Q32 Q33 Q38 Q48 (search for similar items in EconPapers)
Date: 2004-05-12, Revised 2005-08-01
New Economics Papers: this item is included in nep-dev and nep-reg
Note: Type of Document -
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Corruption, the resource curse and genuine saving (2007)
Working Paper: Corruption, the resource curse and genuine saving (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpdc:0405010

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