Institutions and the Resource Curse
Open accessAbstract
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.
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Mehlum, Moene, and Torvik (2006) found the negative growth effect of resource richness present and larger only in countries with poor institutional quality, with a break-even point around Botswana's institutional quality.
“Important later contributions include Mehlum, Moene, and Torvik (2006) who interact resource abundance with institutional quality and find the negative effect of resource-richness on growth to be present (and larger) only for countries with poor institutional quality, the break-even point being around the institutional quality of Botswana.”
From Using Natural Resources for Development: Why Has It Proven So Difficult? (2016) · cites this paper as Mehlum, Moene, and Torvik (2006)
Section 4 (Testing; page unavailable) reports a positive resource-abundance–institutional-quality interaction and says the resource curse weakens as institutional quality rises, disappearing above an index threshold of about 0.93. Section 1 (Introduction; page unavailable) describes Botswana as resource-rich with strong growth and a favorable corruption score, but does not place its institutional-quality index near that threshold. The Botswana break-even comparison is therefore unsupported by our copy. (LLM, conf=0.88)
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Cites
Learning by doing and the Dutch disease
Torvik, R. (2001) · European Economic Review · doi:10.1016/s0014-2921(99)00071-9 · Cited by 529 · see citing works
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Cited by
Sorted by citations
Using Natural Resources for Development: Why Has It Proven So Difficult?
Venables, A. J. (2016) · Journal of Economic Perspectives · doi:10.1257/jep.30.1.161 · Cited by 634 · see citing works
Gerring, J. (2010) · Comparative Political Studies · doi:10.1177/0010414010376911 · Cited by 279 · see citing works
The effects of natural resources on human capital accumulation: A literature survey
Mousavi, A., & Clark, J. (2021) · Journal of Economic Surveys · doi:10.1111/joes.12441 · Cited by 45 · see citing works
Weng, K. C., Glazier, E., Nicol, S. J., & Hobday, A. J. (2015) · Deep Sea Research Part II: Topical Studies in Oceanography · doi:10.1016/j.dsr2.2014.10.025 · Cited by 17 · see citing works
- Authors
- Mehlum, H., Moene, K., & Torvik, R.
- Affiliations
- University of Oslo and International Peace Research Institute, Oslo
- University of Oslo (NO)
- Norwegian University of Science and Technology (NO)
- ORCID
- Moene, Karl
- Venue
- The Economic Journal
- Publisher
- Oxford University Press (OUP)
- Published
- 2006-01-01
- Volume
- 116
- Issue
- 508
- Pages
- 1-20
- ISSN
- 0013-0133 (ISSN-L)
- 1468-0297
- OpenAlex
- W1484474409
- Cited by
- 2,864
- References
- 1
- Citations by year
- 2026: 137 · 2025: 135 · 2024: 134 · 2023: 187 · 2022: 139 · 2021: 165 · 2020: 189 · 2019: 176 · 2018: 149 · 2017: 174 · 2016: 141 · 2015: 138 · 2014: 184 · 2013: 157 · 2012: 158
- FWCI
- 158.62
- Type
- journal article
- Language
- en
- Open access
- green
- hdl.handle.net
- Licence
- Locations
- The Economic Journal (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Econstor (Econstor) (submittedVersion)
- NORA - Norwegian Open Research Archives (submittedVersion, other-oa)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Natural Resources and Economic Development
- Social Sciences › Demography › Culture, Economy, and Development Studies
- Social Sciences › Sociology and Political Science › Corruption and Economic Development
- Keywords
- resource curse, natural resource wealth, institutional quality, economic growth, aggregate income
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