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

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.

Bjorvatn, Kjetil, Mohammad Reza Farzanegan and Friedrich Schneider (2012), Resource Curse and Power Balance: Evidence from Oil-Rich Countries, World Development 40 , 1308-1316