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Political Foundations of the Resource Curse

33 Pages Posted: 8 Aug 2002  

James A. Robinson

Harvard University - Department of Government; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Ragnar Torvik

Norwegian University of Science and Technology (NTNU) - Department of Economics

Thierry Verdier

Paris School of Economics (PSE); Delta - Ecole Normale Superieure (ENS); Centre for Economic Policy Research (CEPR)

Date Written: June 2002

Abstract

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

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

James A. Robinson (Contact Author)

Harvard University - Department of Government ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States
617-496-2839 (Phone)
617-495-8292 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ragnar Torvik

Norwegian University of Science and Technology (NTNU) - Department of Economics ( email )

N-7491 Trondheim
Norway
+47 735 91420 (Phone)
+47 735 96954 (Fax)

Thierry Verdier

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014
France

Delta - Ecole Normale Superieure (ENS) ( email )

48, Boulevard Jourdan
75014 Paris
France
+33 1 4313 6308 (Phone)
+33 1 4313 6310 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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