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Corruption, the Resource Curse and Genuine Saving

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  • Simon Dietz
  • Eric Neumayer
  • Indra de Soysa

Abstract

Genuine saving measures net investment in produced, natural and human capital. It is a necessary condition for weak sustainable development that genuine saving not be persistently negative. However, according to data provided by the World Bank, resource-rich countries are systematically failing to meet this condition. Alongside the well-known resource curse on economic growth, resource abundance might have a negative effect on genuine saving. In fact, the two are closely related, as future consumption growth is limited by insufficient genuine saving now. In this paper, we apply the most convincing conclusion from the literature on economic growth – that it is institutional failure that depresses growth – to data on genuine saving. We regress genuine saving on four indicators of institutional quality in interaction with an indicator of resource abundance. The indicators of institutional quality are corruption, bureaucratic quality, the rule of law and political constraints on the executive. We find that reducing corruption has a positive impact on genuine saving in interaction with resource abundance. That is, the negative effect of resource abundance on genuine saving is reduced as corruption is reduced. We find no robust evidence that the other indicators of institutional quality also have an impact on genuine saving.

Suggested Citation

  • Simon Dietz & Eric Neumayer & Indra de Soysa, 2004. "Corruption, the Resource Curse and Genuine Saving," Development and Comp Systems 0405010, University Library of Munich, Germany, revised 01 Aug 2005.
    • Handle: RePEc:wpa:wuwpdc:0405010
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    More about this item

    Keywords

    weak sustainability; corruption; institutional quality; resources; curse;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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