Natural Resources and Sub-National Economic Performance: Do Economic or Political Institutions Matter?
59 Pages Posted: 4 Nov 2010 Last revised: 9 Nov 2013
Date Written: September 12, 2011
The differentiation in the impact of resources on economic growth is often explained by the specifics of political and institutional factors. The aim of this paper is to study this effect looking separately at economic and political institutions and at their interaction. Unlike most empirical papers in the literature, this paper considers the intra-national variation of institutional environment and political decision-making mechanisms, using a dataset of the Russian regions. It shows that sub-national variation of the quality of institutions indeed matters for the growth effects of resources and conjectures about possible mechanisms of these influences. Specifically, in Russia there is a positive and robustly significant resource effect observed only for regions with high quality of economic institutions and low democracy. This paper also studies the differentiation between the resource-extracting regions and regions, exporting, but not extracting resources, and shows that only for the former resource effect is conditional on institutional quality.
Keywords: oil and gas, sub-national institutional variation, conditional growth effect of resources, democracy, economic institutions, Russian regions
JEL Classification: O13, P28, Q48
Suggested Citation: Suggested Citation