Institutions and the Volatility Curse
Cambridge Working Papers in Economics
Faculty of Economics
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Leong, W., & Mohaddes, K. (2011). Institutions and the Volatility Curse. https://doi.org/10.17863/CAM.1162
This paper revisits the resource curse paradox and studies the impact of resource rents and their volatility on economic growth under varying institutional quality. Using five-year non-overlapping observations between 1970 and 2005 for 112 countries, we find that while resource rents enhance real output per capita, their volatility exerts a negative impact on economic growth. Therefore, we argue that volatility, rather than abundance per se, drives the resource curse. However, we also find that higher institutional quality can help offset some of the negative volatility effects of resource rents. Therefore, resource abundance can be a blessing provided that growth and welfare enhancing policies and institutions are adopted.
Economic growth, resource curse, institutions, resource rent, and commodity price volatility.
This record's DOI: https://doi.org/10.17863/CAM.1162
This record's URL: https://www.repository.cam.ac.uk/handle/1810/257234
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