Political Foundations of the Resource Curse

33 Pages Posted: 8 Aug 2002

See all articles by James A. Robinson

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); Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; 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). Available at SSRN: https://ssrn.com/abstract=322585

James A. Robinson (Contact Author)

Harvard University - Department of Government ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Ragnar Torvik

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

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Norway
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+47 735 96954 (Fax)

Thierry Verdier

Paris School of Economics (PSE) ( email )

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Paris, 75014
France

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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