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Resource Curse and Institutions

  • Mohammed Akacem
  • Dennis Dixon Miller
  • John Leonard Faulkner
Chapter
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Abstract

Natural resource wealth such as oil is thought to be a curse rather than a blessing. The main reason is that the flow of oil revenues goes to the government and leads to rent seeking and corruption. It also helps autocratic governments to remain in power with no incentive to alter the status quo. To make matters worse, economies that are heavily dependent on oil revenues tend to have overvalued exchange rates which hurt the non-oil sector and further deepen these countries’ dependence on oil.

However, empirical evidence is mixed on the effect and the direction of causation between oil, institutions, and the economy. The evidence does show that countries such as Norway that discovered oil after having developed good institutions have done well despite the presence of oil riches. Yet, oil MENA, which discovered oil first, has tried to build viable institutions after discovering oil but is still struggling to do so. We also note that Singapore without any resource wealth but with solid institutions has done well. The presence or absence of oil does not explain the failure or success of a country. Institutions do. MENA rates poorly compared to the rest of the world on many institutional indices and economic indicators as shown in this chapter.

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  • Mohammed Akacem
    • 1
  • Dennis Dixon Miller
    • 2
  • John Leonard Faulkner
    • 3
  1. 1.Department of Economics Campus Box 77Metropolitan State University of DenverDenverUSA
  2. 2.Baldwin Wallace UniversityBereaUSA
  3. 3.ArlingtonUSA

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