Resource Curse in Hybrid Regimes: Do Economic or Political Institutions Matter?

Alexander Libman (Frankfurt School of Finance & Management)

Abstract: Resource curse is often explained by the specifics of political and institutional factors. The aim of this paper is to study the interaction between the quality of institutions and the resources in a framework of a hybrid regime (i.e. allowing only for a moderate improvements of the property rights protection and democracy not sufficient to achieve the level of the industrialized nations), looking separately at economic and political institutions. Unlike almost all empirical papers in the literature, this paper applies the intra-national variation of institutional environment and access to political decision-making, using a dataset from the Russian regions. It shows that in a hybrid regime (i.e. comparing "bad" and "worse" in terms of the quality of institutions) economic institutions follow the traditional “resource curse” results: resources have a negative impact on growth if the quality of institutions is low. On the other hand, increasing level of democracy has negative consequences for regions with substantial resources. The results, however, differ for different types of natural endowments and dimensions of democracy.

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