LSE LSE Research Laboratory LSE
LSE Research Laboratory (RLAB)

Abstract for:

Leader Behavior and the Natural Resource Curse

Francesco  Caselli,  Tom  Cunningham,  March 2009
Paper No' CEPDP0913: | Full paper (pdf)
Save Reference as: BibTeX BibTeX File | Endote EndNote Import File
Keywords: Natural resource endowment; resource curse, political economy

JEL Classification: O11; O13; P26

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
Share this page: Google Bookmarks Google Bookmarks | Facebook Facebook | Twitter Twitter

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.