Education,Rent seeking and the Curse of Natural Resources

Empirical evidence suggests that natural resources breed corruption and reduce educational attainments, dampening economic growth. The theoretical literature has treated these two channels separately, with natural resources affecting growth either through human capital or corruption. In this article, we argue that education and corruption are jointly determined and depend on the endowment of natural resources. Natural resources affect the incentives to invest in education and rent seeking that in turn affect growth. Whether natural resources stimulate growth or induce a poverty‐trap crucially depends on inequality in access to education and political participation, as well as on the cost of political participation. For lower inequality and higher cost of political participation, a high‐growth and a poverty‐trap equilibrium coexist even with abundant natural resources.     

Corruption and natural resource rents: evidence from quantile regression

This study examines the impacts of oil rents on corruption for 157 countries. While existing studies have primarily focused on average effects, we employ quantile regression to estimate the effects of natural resource abundance for different corruption levels. We consider the effects of natural resource rents, mainly oil rents and then compare them with those of total and non-oil natural resources rents. The estimation results show that, generally, more oil rents increase corruption. Specifically, impacts are larger in countries with an intermediate level of corruption and smaller in highly corrupt countries. While total resource rents increase corruption significantly, non-oil resource rents do not. This may be due to non-oil resource rent management (mainly inland) being more subject to public scrutiny. Non-oil natural resources are concentrated in the less-developed sub-Saharan African countries, where corruption is prevalent; therefore, the impacts of natural resource rents are unremarkable.     

Oil rents, corruption, and state stability: Evidence from panel data regressions

We examine the effects of oil rents on corruption and state stability exploiting the exogenous within-country variation of a new measure of oil rents for a panel of 30 oil-exporting countries during the period 1992–2005. We find that an increase in oil rents significantly increases corruption, significantly deteriorates political rights while at the same time leading to a significant improvement in civil liberties. We argue that these findings can be explained by the political elite having an incentive to extend civil liberties but reduce political rights in the presence of oil windfalls to evade redistribution and conflict. We support our argument documenting that there is a significant effect of oil rents on corruption in countries with a high share of state participation in oil production while no such link exists in countries where state participation in oil production is low.     

Natural resources, democracy and corruption

We study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions. Our game-theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor, but not otherwise. We use panel data covering the period 1980-2004 and 124 countries to test this theoretical prediction. Our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions. Our main results hold when we control for the effects of income, time varying common shocks, regional fixed effects and various additional covariates. They are also robust across different samples, and to the use of various alternative measures of natural resources, democracy and corruption.     

The Dynamic Relationship Between Corruption–Inflation: Evidence From Panel Vector Autoregression

This paper aims to explain the mixed causality nexus between corruption and inflation. For that, we apply a panel vector autoregression model on a large sample of 180 countries over the period 1996–2014. Using two corruption indexes and subsample estimations, results provide evidence that the inflation–corruption nexus is bidirectional. The causal effect is more important from corruption to inflation. Interactions remain significant but heterogeneous across subsamples with different income levels. The corruption effect is persistent only in low–middle income economies and its adverse effect on inflation is weaker in high‐income economies. The two‐way relationship between inflation and corruption reflects the inability to control inflation and the situation of the poverty trap in some countries.     

Crony capitalism,the party-state,and the political boundaries of corruption

We build a model that puts together crony capitalism, the hierarchy of the Chinese communist party-state, and the decision-making process inside the Party Center. We show that inefficient economic institutions create local corruption that raises realized productivity, while generating rents that flow along the party-state hierarchy up to the provincial level, threatening the Center’s control in potential crises. Although both stronger crisis control and higher economic performance help the Center’s goal to stay in power, we show that given a general fat-tailed risk of crisis, the Center will maximize crisis control at the expense of the economy when choosing its tolerance of local corruption. Power structure and corruption within the Center and reciprocal accountability between central and provincial leaders are also analyzed. Our analysis suggests conditions under which China’s communist regime will or will not deal with the existential threat presented by corruption.     

GROWTH, POVERTY, AND INEQUALITY IN LATIN AMERICA: A CAUSAL ANALYSIS, 1970–94

Taking advantage of consistent poverty and income inequality data for 12 Latin American countries between 1970 and 1994, we analyze the determinants of changes in the incidence of urban and rural poverty and in Gini coefficients over spells of years, stressing in particular the role of aggregate income growth. We find that income growth reduces urban and rural poverty but not inequality. We also find that income growth is more effective in reducing urban poverty if the levels of inequality and poverty are lower, and the levels of secondary education higher. We show that there is an asymmetry in the impact of growth on poverty and inequality, with recession having strong negative effects on both poverty and inequality. Since growth does not reduce inequality, economic cycles create ratchet effects on the level of inequality. However, post-structural adjustment growth is quite effective at reducing poverty, particularly if inequality is low.     

Rent seeking and the economics of corruption

The paper studies the influence of Tullock (West Econ J 5:224–232, 1967) and the rent-seeking literature more generally on the study of corruption. The theoretical corruption literature with its emphasis on principal-agent relationships within government and rent creation by corruption politicians has largely, but not entirely, overlooked that contestable rents encourage unproductive use of real resources in seeking these rents. As a consequence, the literature underestimates the value of corruption control and the cost of corruption itself.     

Poverty traps,aid, and growth

This paper examines the empirical relevance of the poverty trap view of underdevelopment. We calibrate simple aggregate growth models in which poverty traps can arise due to either low saving or low technology at low levels of development. We then assess the empirical relevance of these specific mechanisms and their consequences for policy. We find little evidence of the existence of poverty traps based on these two mechanisms. When put to the task of explaining the persistence of low income in African countries, the models require either unreasonable values for key parameters, or else generate counterfactual predictions regarding the relations between key variables. These results call into question arguments in favour of a large scaling-up of aid to the poorest countries that are premised on the existence of such poverty traps.     

Who gains from non-collusive corruption?

Non-collusive corruption, i.e., corruption that imposes an additional burden on business activity, is particularly widespread in low-income countries. We build a macroeconomic model with credit market imperfections and heterogeneous agents to explore the roots and consequences of this type of corruption. We find that credit market imperfections, by generating rents for the incumbent entrepreneurs, create strong incentives for corrupt behavior by state officials. However, non-collusive corruption not only redistributes income from non-officials towards officials but also within the group of potential entrepreneurs. If borrowing is limited, bribes prevent poorer but talented individuals from starting a business. But this is likely to benefit those who may enter anyway; the cost of capital is lower and there is less competition on the goods markets.     

Escaping the poverty trap in a developing rural economy

Abstract. In this paper, we examine the economic policies that might allow a developing rural economy to escape from the poverty trap characterized by a subsistence level of per capita consumption in the long run. In our model where labour is combined to land available in fixed quantity to produce a homogeneous good, saving could be made through only having children, the number of which is an endogenous decision. We provide conditions under which the economy runs into a poverty trap, and proceed to analyse the relevant policies in this case. We demonstrate that an escape from this poverty trap is possible through a suitable technology transfer, or an appropriate child‐rearing tax, but not with a foreign manufacturing sector, which increases only temporarily the labour income in this rural economy. JEL classification: J11, O11, O40     

Do the poor benefit from globalization regardless of institutional quality?

Despite significant progress towards the Millennium goals, more than one billion people live on less than 1.25 US dollars per day. Previous research suggests that globalization stimulates poverty reduction, but does not investigate what role institutions play in this relationship. Theoretically, globalization could act as either a complement or a substitute to institutional quality in reducing poverty. We find that the poverty-reducing effect of globalization is stronger when institutions are weak. In particular, increasing social globalization reduces poverty more when corruption is high and democratic accountability is low. Thus, globalization has the power to reduce poverty even in countries with low institutional quality.     

Democracy,rent seeking,public spending and growth

Does democratization imply faster growth, less corruption and less inefficiency? Past studies yield ambiguous results on the effects of democracy on economic performance and growth. We develop a simple two-sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization, producing a ‘U’ effect. This effect results from the pattern of rent seeking as it diverts from the provision of public goods. Rent-seekers act as monopolistic competitors. Initially, more democracy increases their number, raising aggregate rents. However, rents per rent-seeker fall with the number of rent seekers. Due to this crowding effect and the increased competition among rent seekers, aggregate rents fall in mature democracies. Thus, rents show an ‘inverted-U’ effect in relation to democracy. We find fairly robust supportive evidence for the latter.     

The political economy of corruption and the role of economic opportunities1

In many developing and transition countries, we observe rather high levels of corruption. We argue that the missing political support for anti‐corruption policies is due to a lack of economic and financial reforms. Our model is based on the fact that corrupt officials have to pay entry fees to get lucrative positions. In a probabilistic voting model, we show that this, together with the lack of economic opportunities, makes anti‐corruption policies less likely. Compared to a reformed economy, more voters are part of the corrupt system and, more importantly, rents from corruption are distributed differently. Economic liberalization increases the support for anti‐corruption measures. The additional effect of financial liberalization is ambiguous.     

Informality and Long‐Run Growth

One of the most salient features of developing economies is the existence of a large informal sector. In this paper, we use quantitative theory to study the dynamic implications of informality on wage inequality, human capital accumulation, child labor, and long‐run growth. Our model can generate transitory informality equilibria or informality‐induced poverty traps. Its calibration reveals that the case for the poverty‐trap hypothesis arises: although informality serves to protect low‐skilled workers from extreme poverty in the short run, it prevents income convergence between developed and developing nations in the long run. Then we examine the effectiveness of different development policies to exit the poverty trap. Our numerical experiments show that using means‐tested education subsidies is the most cost‐effective single policy option. However, for longer time horizons, or as the economy gets closer to the poverty trap threshold, combining means‐tested education and wage subsidies is even more effective.     

自然资源丰裕、环境管制失效与生态“诅咒”

文章对"资源诅咒性"的概念进行拓展,重点研究了自然资源对生态环境的"诅咒"效应.研究结果表明,从中国省际层面来看这种"诅咒"效应确实存在,而且制度的弱化加剧了这种"诅咒"的程度.具体表现为环境管制政策的失效、资源价格机制的扭曲、产权制度安排的不合理以及资源主导型经济体环境保护的意识和投入力度落后于其他非资源主导型经济体等.从长期来看,解除这种"诅咒"效应的根本在于转变传统的经济增长模式,实现资源与环境管制上的制度创新.     

Demand,Supply, and Labor Market Analysis

Our previous research argued that interest payments on consumer debt should be subtracted from household income to measure poverty. We estimated 4 million additional poor Americans in 2007, calling them "debt poor." This paper finds that the debt poor are somewhat like the poor (they are unlikely to own a home or have private health insurance), somewhat like middle-class households (race), and in-between in other ways (education levels). Debt poor households were likely middle class once, having access to considerable consumer credit; but following a loss of income, their large debt burden put their living standard below their poverty threshold.     

Competition and corruption in an agency relationship

The paper reconsiders the relationship between competition and corruption in a model, where corruption has solid informational foundations and where the regulatory response to the possibility of corruption is taken into account. It is shown that the effect of greater competition on corruption depends on the complementarity or substitutability of the two instruments available to decrease information rents, namely low powered incentives and greater competition. The paper concludes with a brief empirical exploration of the relationship between competitiveness and corruption on African data.     

Corruption and the Political Economy of Resource-Based Development: A Comparison of Asia and Sub-Saharan Africa

We model how the “supply and demand” for bribes affects resource use by an economy, and the reinvestment of resource rents in other assets. This requires adjusting the World Bank’s measure adjusted net savings for any rent dissipation due to corruption. The impacts of corruption on long-run changes and periodic growth in the adjusted net savings rate are estimated across African and Asian economies from 1970 to 2003. Corruption rather than resource dependency per se affects negatively the ability of African countries to reinvest resource rents in the short term, but for Asian countries, corruption is less important than point resources. Corruption influences long-run growth in adjusted net savings rates in all countries, and is also the “pathway” through which this growth is affected by patterns of resource use, trade and abundance.     

Imitation and evolutionary stability of poverty traps

This paper develops a bioeconomic model applying evolutionary game theory to the notion of poverty traps. We study the evolution of the social norm of being either a high-type or low-type in a dynamic environment where agents are driven by an imitative behavior. History matters because given initial conditions, agents imitate according to their current success in payoffs and the current profile of economic agents in the economy. We define a poverty trap as an evolutionarily stable strategic profile and steady state of the replicator dynamics. We show that in poor economies with a large fraction of low-type agents imitative strategies do not support a take-off into sustained growth. To achieve that take-off, society should subsidize critical parameters of the expected payoffs such that economic agents may change the initial conditions and the economy gets a critical mass of high-type economic agents, and so to overcome the poverty trap.