Cursed by Resources or Institutions?
Version of Record online: 12 APR 2006
The World Economy
Volume 29, Issue 8, pages 1117–1131, August 2006
How to Cite
Mehlum, H., Moene, K. and Torvik, R. (2006), Cursed by Resources or Institutions?. World Economy, 29: 1117–1131. doi: 10.1111/j.1467-9701.2006.00808.x
- Issue online: 12 APR 2006
- Version of Record online: 12 APR 2006
Natural resource-abundant countries constitute both growth losers and growth winners, and the main difference between the success cases and the cases of failure lies 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 strengthens the negative effect of more natural resources.