Caselli, Francesco and Cunningham, Tom (2009) Leader behavior and the natural resource curse. CEP Discussion Paper No. 913. Centre for Economic Performance, London School of Economics and Political Science, London, UK.
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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)|
|Additional Information:||© 2009 the authors|
|Library of Congress subject classification:||H Social Sciences > HC Economic History and Conditions|
|Journal of Economic Literature Classification System:||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
|Sets:||Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
|Identification Number:||CEP Discussion Paper No. 913|
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