Leader behavior and the natural resource curse

Caselli, Francesco ORCID: 0009-0001-5191-7156 and Cunningham, Tom (2009) Leader behavior and the natural resource curse. CEP discussion papers (913). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We discuss political economy mechanisms which can explain the resource curse, in which an increase in the size of resource rents causes a decrease in the economy’s total value added. We identify a number of channels through which resource rents will alter the incentives of a political leader. Some of these induce greater investment by the leader in assets that favour growth (infrastructure, rule of law, etc.), others lead to a potentially catastrophic drop in such activities. As a result, the effect of resource abundance can be highly non-monotonic. We argue that it is critical to understand how resources affect the leader’s "survival function", i.e. the reduced-form probability of retaining power. We also briefly survey decentralised mechanisms, in which rents induce a reallocation of labour by private agents, crowding out productive activity more than proportionately. We argue that these mechanisms cannot be fully understood without simultaneously studying leader behaviour.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk/_new/publications/year.asp
Additional Information:	© 2009 the authors
Divisions:	Centre for Economic Performance Economics
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P26 - Political Economy; Property Rights O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Date Deposited:	07 Oct 2009 16:28
Last Modified:	01 Oct 2024 03:18
URI:	http://eprints.lse.ac.uk/id/eprint/25430

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