Corruption, the Resource Curse and Genuine Saving

Environment and Development Economics, Vol. 12, No. 1, 2007

16 Pages Posted: 13 May 2004 Last revised: 16 Feb 2009

See all articles by Simon Dietz

Simon Dietz

London School of Economics - Grantham Research Institute on Climate Change and the Environment and Department of Geography and Environment

Eric Neumayer

London School of Economics and Political Science (LSE)

Indra De Soysa

Norwegian University of Science and Technology

Date Written: January 1, 2006

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 gross and genuine saving on three indicators of institutional quality in interaction with an indicator of resource abundance. The indicators of institutional quality are corruption, bureaucratic quality and the rule of law. 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.

Keywords: Weak sustainability, corruption, institutional quality, resources, curse

JEL Classification: E21, E60, Q32, Q33, Q38, Q48

Suggested Citation

Dietz, Simon and Neumayer, Eric and De Soysa, Indra, Corruption, the Resource Curse and Genuine Saving (January 1, 2006). Environment and Development Economics, Vol. 12, No. 1, 2007. Available at SSRN: https://ssrn.com/abstract=545502

Simon Dietz

London School of Economics - Grantham Research Institute on Climate Change and the Environment and Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://personal.lse.ac.uk/dietzs

Eric Neumayer (Contact Author)

London School of Economics and Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 207 955 7598 (Phone)
+44 207 955 7412 (Fax)

HOME PAGE: http://personal.lse.ac.uk/neumayer

Indra De Soysa

Norwegian University of Science and Technology ( email )

Trondheim NO-7491
Norway

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