Factionalism, oil and economic growth in Iran: where is the curse?

This study examines the common wisdom of “natural resource curse” in rentier economy of Iran. Contrary to existing believe that higher oil rents are harmful for economic growth, we instead show that increasing political factionalism in an oil economy is a curse for economic growth. We find a dampening effect of higher symmetry of political power structure on growth for the case of Iran. For the maximum level of factionalism, one standard deviation increase in the share of oil rents in the government budget reduces real economic growth by 9% due to rent-seeking efforts.

Farzanegan, Mohammad Reza and Friedrich Schneider (2009), Factionalism, oil and economic growth in Iran: where is the curse?, Magdeburg