Sunday, November 15, 2009

Does the Natural Resource Curse not Apply in Democracies?

One of my colleagues, Sambit Bhattacharya, has an article out on natural resources and corruption. Their conclusion is:

"Resource-rich countries are often cursed by corruption and governance problems. This column shows that the natural resource curse burdens non-democracies, but countries with better democratic institutions are not corrupted by such endowments. For governments accountable to their citizens, resources can be a blessing."

Democratic countries are mostly less corrupt and they argue that if democracy is established before resources are discovered then the resources do not promote corruption. Maybe that explains Indonesia where democracy has been established only recently and corruption is high.

I've been looking at the relationship between resource endowment and carbon emissions with a couple of other colleagues recently (more on this if and when we get a working paper out). Definitely the economies with large resource endowments tend to have higher and apparently faster growing carbon emissions. Partly this is due to mining being a very energy intensive industry but probably also due to these countries (e.g. Australia) not regulating or taxing resource use as stringently as countries with small endowments. Is this due to a difference in perceptions of resource security? Or is this due to the resource lobby actively preventing regulation? And if it is the latter is that a form of corruption? It's not included in indices of corruption but it is definitely "rent-seeking".

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