2009/07/30 by F. Caselli, Francesco Caselli, T. Cunningham +1 · 185 citations
Economics, Econometrics and Finance · Engineering · Social Sciences · #Computer science #Curse #Economics #Hydropower, Displacement, Environmental Impact #Law #Library science #Management #Media studies #Mining and Resource Management #Natural Resources and Economic Development #Natural resource #Neoclassical economics #Political science #Resource (disambiguation) #Resource curse #Schools of economic thought #Sociology
paper · doi:10.1093/oep/gpp023
published in Oxford Economic Papers 61(4), 628-650 (Oxford University Press)
openalex publication_date 2009/07/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/02
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.