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Resource Curse and Power Balance: Evidence from Iran

Author

Listed:
  • Bjorvatn Kjetil

    (NHH Norwegian School of Economics, Bergen, Norway)

  • Farzanegan Mohammad Reza

    (Department of the Middle East Economics, Philipps-University of Marburg, Center for Near and Middle Eastern Studies (CNMS), MACIE & CESifo, Marburg, Germany)

  • Schneider Friedrich

    (Department of Economics, University of Linz, Linz, Austria)

Abstract

Empirical research shows that natural resources have a detrimental effect on economic growth, a phenomenon known as the “resource curse”. Competition between influence groups for access to the resource rents, that is, rent-seeking, is often blamed for this curse. In this article, we dig deeper into the link between political competition and the resource curse by studying the case of Iran from 1960 to 2007. We present a theoretical model demonstrating how the effect of rents on the economy depends on the balance of political power. The model shows that an increase in rents may lead to a sharp reduction in income when the distribution of power between influence groups is relatively balanced. The empirical evidence confirms the predictions of the model.

Suggested Citation

  • Bjorvatn Kjetil & Farzanegan Mohammad Reza & Schneider Friedrich, 2013. "Resource Curse and Power Balance: Evidence from Iran," Review of Middle East Economics and Finance, De Gruyter, vol. 9(2), pages 133-158, August.
    • Handle: RePEc:bpj:rmeecf:v:9:y:2013:i:2:p:133-158:n:4
    DOI: 10.1515/rmeef-2012-0029
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    References listed on IDEAS

    as
    1. Barro, Robert J, 1996. "Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
    2. Andersen, Jørgen Juel & Aslaksen, Silje, 2008. "Constitutions and the resource curse," Journal of Development Economics, Elsevier, vol. 87(2), pages 227-246, October.
    3. Christopher F Baum, 2006. "An Introduction to Modern Econometrics using Stata," Stata Press books, StataCorp LP, number imeus, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Njangang, Henri & Asongu, Simplice A. & Tadadjeu, Sosson & Nounamo, Yann & Kamguia, Brice, 2022. "Governance in mitigating the effect of oil wealth on wealth inequality: A cross-country analysis of policy thresholds," Resources Policy, Elsevier, vol. 76(C).
    2. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2015. "Natural-Resource Rents and Political Stability in the Middle East and North Africa," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(03), pages 33-37, October.
    3. Farzanegan, Mohammad Reza & Raeisian Parvari, Mozhgan, 2014. "Iranian-Oil-Free Zone and international oil prices," Energy Economics, Elsevier, vol. 45(C), pages 364-372.
    4. Mohammad Reza Farzanegan & Hassan Fereidouni Gholipour, 2016. "Divorce and the cost of housing: evidence from Iran," Review of Economics of the Household, Springer, vol. 14(4), pages 1029-1054, December.
    5. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2014. "Resource Rents, Power, and Political Stability," CESifo Working Paper Series 4727, CESifo.
    6. Farzanegan, Mohammad Reza & Krieger, Tim, 2017. "The response of income inequality to positive oil rents shocks in Iran: Implications for the post-sanction period," Discussion Paper Series 2017-04, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
    7. Huang, Xinpeng & Meng, Fanshi, 2023. "Digital finance mitigation of ' resource curse ' effect: Evidence from resource-based cities in China," Resources Policy, Elsevier, vol. 83(C).
    8. Farzanegan, Mohammad Reza & Markwardt, Gunther, 2018. "Development and pollution in the Middle East and North Africa: Democracy matters," Journal of Policy Modeling, Elsevier, vol. 40(2), pages 350-374.
    9. Mohammad Reza Farzanegan & Sajjad Faraji Dizaji, 2014. "Political Institutions and Government Spending Behavior in Iran," MAGKS Papers on Economics 201403, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    10. Naghavi, Alireza & Pignataro, Giuseppe, 2015. "Theocracy and resilience against economic sanctions," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 1-12.
    11. Mohammad Reza Farzanegan & Mohammad Habibpour, 2014. "Direct Distribution of Rents and the Resource Curse in Iran: A Micro-econometric Analysis," CESifo Working Paper Series 4824, CESifo.
    12. Farzanegan, Mohammad Reza & Habibpour, Mohammad Mahdi, 2017. "Resource rents distribution, income inequality and poverty in Iran," Energy Economics, Elsevier, vol. 66(C), pages 35-42.
    13. Mohammad Reza Farzanegan & Tim Krieger, 2018. "Oil Revenues Shocks and Inequality in Iran," Working Papers 1226, Economic Research Forum, revised 18 Sep 2018.
    14. Kjetil Bjorvatn & Mohammad Reza Farzanegan, 2015. "Natural-Resource Rents and Political Stability in the Middle East and North Africa," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(3), pages 33-37, October.
    15. Mohammad Reza Farzanegan & Marcel Thum, 2017. "Oil Dependency and Quality of Education: New Empirical Evidence," MAGKS Papers on Economics 201745, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    16. Mehdi Ketabchy, 2021. "Investigating the Impacts of the Political System Components in Iran on the Existing Water Bankruptcy," Sustainability, MDPI, vol. 13(24), pages 1-22, December.
    17. Maddah, Majid & Ghaffari Nejad, Amir Hossein & Sargolzaei, Mostafa, 2022. "Natural resources, political competition, and economic growth: An empirical evidence from dynamic panel threshold kink analysis in Iranian provinces," Resources Policy, Elsevier, vol. 78(C).
    18. Bjorvatn, Kjetil & Farzanegan, Mohammad Reza & Schneider, Friedrich, 2012. "Resource Curse and Power Balance: Evidence from Oil-Rich Countries," World Development, Elsevier, vol. 40(7), pages 1308-1316.
    19. repec:ces:ifodic:v:13:y:2015:i:3:p:19173861 is not listed on IDEAS
    20. Gholipour, Hassan F. & Farzanegan, Mohammad Reza, 2015. "Marriage crisis and housing costs: Empirical evidence from provinces of Iran," Journal of Policy Modeling, Elsevier, vol. 37(1), pages 107-123.
    21. Farzanegan, Mohammad Reza & Thum, Marcel, 2017. "More oil, less quality of education? New empirical evidence," CEPIE Working Papers 09/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    22. Mohammad Reza Farzanegan, 2014. "Can Oil-Rich Countries Encourage Entrepreneurship? ‘Yes’, ‘No’ but not ‘Perhaps’," MAGKS Papers on Economics 201406, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    23. Mohammad Reza Farzanegan & Tim Krieger, 2018. "Oil Rents Shocks and Inequality in Iran," CESifo Working Paper Series 6876, CESifo.
    24. Mohammad Reza Farzanegan & Pooya Alaedini & Khayyam Azizimehr, 2017. "Middle Class in Iran: Oil Rents, Modernization, and Political Development," MAGKS Papers on Economics 201756, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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    More about this item

    Keywords

    natural resource curse; political power; economic growth; Iran;
    All these keywords.

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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