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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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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
Library of Congress subject classification: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q34 - Natural Resources and Domestic and International Conflicts
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 04 Apr 2011 13:26
URL: http://eprints.lse.ac.uk/33834/

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