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Resource Curse and Power Balance: Evidence from Oil-Rich Countries

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  • Bjorvatn, Kjetil
  • Farzanegan, Mohammad Reza
  • Schneider, Friedrich

Abstract

We examine the role of political fractionalization in understanding the “resource curse”. Using panel data for 30 oil-rich countries, we find that the income effect of resource rents is moderated by the political power balance. With a strong government, resource wealth can generate growth even in an environment of poorly developed institutions, while adding oil revenues to a weak government may have damaging effects on the economy. These results have important implications for the economic prospects of the oil-rich countries in the Middle East, which are currently undergoing profound political changes.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:wdevel:v:40:y:2012:i:7:p:1308-1316
    DOI: 10.1016/j.worlddev.2012.03.003
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