Political Economy Models of the Resource Curse: Implications for Policy and Research

Abstract

A number of studies suggest that natural resources can have a negative impact on the developing prospects of countries. This paper reviews political economy models of the resource curse, and draws implications of these models in terms of policy and research priorities. The term impartiality enhancing institutions is introduced to distinguish conditions under which negative effects of resources can be mitigated. The paper further examines current donor policies vis-à-vis resource rich countries, and argues that these policies only to a limited extent reflect the implications of the resource curse literature. Moreover, the paper suggests that the prevalent focus of resource curse studies on resource abundance rather than rents, and on net effects of resources, has put us on the wrong track. Finally, more work is needed to identify more precise policy implications in terms of required institutions and their reform.

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