The institutional basis of efficiency in resource-rich countries

The “resource curse” is a familiar and recurring theme in development economics. But does resource abundance also lead to resource inefficiency? And if so, what can contribute to better usage of a country’s resources for development? This paper examines 130 countries from 1970 to 2011, both resource-abundant and resource-scarce, and concludes that, on average, resource-abundant countries utilize resources less efficiently. Examining the institutional factors that may explain this disparity in usage, we find that several key institutions are necessary for increasing resource use efficiency, with private property showing the largest economic and statistical significance. By improving basic institutions, resource-rich countries can thus see more environmentally sustainable growth.