No. 10/2005
CURSED BY RESOURCES OR INSTITUTIONS?
Halvor Mehlum
Karl Ove Moene
Ragnar Torvik
Abstract:
Natural resource abundant countries constitute both growth losers
and growth winners,
and the main difference between the success cases and the cases of failure
lays
in the quality of institutions. With grabber friendly institutions more
natural resources
push aggregate income down, while with producer friendly institutions
more
natural resources increase income. Such a theory finds strong support
in data. A key
question we also discuss is if resources in addition alter the quality
of institutions.
When that is the case, countries with bad institutions suffer a double
resource curse
- as the deterioration of institutions strenghtens the negative effect
of more natural
resources.
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