『(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.』
1. Introduction
2. How to turn a blessing into a curse
3. Centralized mechanisms
3.1. A simple reduced-form framework
3.2. The busy leader
3.3. The repressive leader
3.4. The strategic leader
3.5. The fatalistic leader
3.6. Sketch of a π(α,b,i) model
3.7. Patronage
3.8. The lazy leader
3.9. Centralized mechanisms: summing up
4. Decentralized mechanisms
4.1. Basic rent seeking model
4.2. Roadblocks
4.3. Civil war
5. Conclusions
Acknowledgements
Funding
References