Avoiding the Resource Curse: The Role of Institutions

Abstract

This paper investigates empirically whether the natural resource curse exists and if institutions can help alleviate this curse. Both cross-country and dynamic panel regressions confirm the important role of institutional quality (measured by either institutional design or institutional performance) in turning natural resources into an economic boon. In terms of influencing the impact of natural resource abundance on growth, a democratic governance system is better than a non-democratic one, a parliamentary democracy is superior to a presidential democracy and, although a majoritarian system tends to contribute more to growth, it suffers more from the resource curse than a proportional system.