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Leader behaviour and the natural resource curse

Caselli, Francesco and Cunningham, Tom (2009) Leader behaviour and the natural resource curse. Oxford Economic Papers, 61 (4). pp. 628-650. ISSN 0030-7653

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Identification Number: 10.1093/oep/gpp023

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 decentralized 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: Article
Official URL: http://oep.oxfordjournals.org/
Additional Information: © 2009 Oxford University Press
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 04 Apr 2011 13:26
Last Modified: 02 Dec 2013 10:32
URI: http://eprints.lse.ac.uk/id/eprint/33834

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