Caselli,F. and Cunningham,T.(2009): Leader behaviour and the natural resource curse. Oxford Economic Paper, 61, 628-650.


 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