Institutions and the Resource Curse

20 Pages Posted: 8 May 2006  

Halvor Mehlum

University of Oslo - Department of Economics

Karl O. Moene

University of Oslo - Department of Economics

Ragnar Torvik

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

Abstract

Countries rich in natural resources constitute both growth losers and growth winners. We claim that the main reason for these diverging experiences is differences in the quality of institutions. More natural resources push aggregate income down, when institutions are grabber friendly, while more resources raise income, when institutions are producer friendly. We test this theory building on Sachs and Warner's influential works on the resource curse. Our main hypothesis - that institutions are decisive for the resource curse - is confirmed. Our results contrast the claims of Sachs and Warner that institutions do not play a role.

Suggested Citation

Mehlum, Halvor and Moene, Karl O. and Torvik, Ragnar, Institutions and the Resource Curse. Economic Journal, Vol. 116, No. 508, pp. 1-20, January 2006. Available at SSRN: https://ssrn.com/abstract=878186 or http://dx.doi.org/10.1111/j.1468-0297.2006.01045.x

Halvor Mehlum (Contact Author)

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway

Karl O. Moene

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+47 22855130 (Phone)
+47 22855035 (Fax)

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)

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