Institutions and the Resource Curse

Peer-reviewed Journal Article

Torvik, Ragnar;Moene, Karl Ove; & Mehlum, Halvor (2006) Institutions and the Resource Curse , Economic Journal 116(508): 1–20.

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 are in sharp contrast to the claim by Sachs and Warner that institutions do not play a role.

Authors

Halvor Mehlum

Halvor Mehlum

Research Economist, Department of Economics, University of Oslo

Karl Ove Moene

Karl Ove Moene

Working Group Leader: Conflict and Economic Performance. Professor of Economics, University of Oslo

Ragnar Torvik

Ragnar Torvik

Professor of Economics NTNU