33 Pages Posted: 8 Aug 2002
Date Written: June 2002
In this Paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse. We show: (1) politicians tend to over-extract natural resources relative to the efficient extraction path because they discount the future too much; (2) resource booms improve the efficiency of the extraction path; (3) resource booms, however, by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections, increase resource misallocation in the rest of the economy and (4) the overall impact of resource booms on the economy depends critically on institutions, since these determine the extent to which political incentives map into policy outcomes. Countries with good institutions tend to benefit from resource booms since these institutions mitigate the perverse political incentives that such booms create. Countries with bad institutions suffer a resource curse.
Keywords: Natural resources, political economy, clientelism
JEL Classification: D72, D78, Q20
Suggested Citation: Suggested Citation
Robinson, James A. and Torvik, Ragnar and Verdier, Thierry, Political Foundations of the Resource Curse (June 2002). CEPR Discussion Paper No. 3422. Available at SSRN: https://ssrn.com/abstract=322585
This is a CEPR Discussion Paper. CEPR charges a fee of $5.00 for this paper.Login using your CEPR Personal Profile
File name: DP3422.
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.