Constitutions and the resource curse

Utilizing the fact that natural resources are randomly distributed among countries, we investigate how public income shocks have different long run economic effects dependent on constitutional arrangements. We find that (i) the so-called ‘resource curse’ is present in democratic presidential countries—but not in democratic parliamentary countries, (ii) being parliamentary or presidential matters more for the growth effects of natural resources than being democratic or autocratic, and (iii) natural resources are more likely to reduce growth when proportional electoral systems are in place than when the electoral systems are majoritarian. The two first effects appear very robust, the last effect less so.     

Political foundations of the resource curse

In this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse. We show: (1) politicians tend to over-extract natural resources relative to the efficient extraction path because they discount the future too much, and (2) resource booms improve the efficiency of the extraction path. However, (3) resource booms, by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections, increase resource misallocation in the rest of the economy. (4) The overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes. Countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create. Countries without such institutions however may suffer from a resource curse.     

新疆存在“资源诅咒”吗

基于国内各省区经济增长和资源丰裕度的统计考察,构造新疆经济增长与资源丰裕度、技术、制度、物质积累等变量的回归模型。检验发现,新疆自然资源对经济增长的负影响存在一期滞后,制度因素对新疆经济增长起着举足轻重的作用。     

Natural resources, capital accumulation and the resource curse

Early concern by economists for the effect of natural capital on economic growth gave way to complacency and neglect during the nineteenth century. Evidence has emerged, however, that since the 1960s the economic performance of low-income countries has been inversely related to their natural resource wealth. This relationship is not a deterministic one so policy counts. SEEA can help improve the policy and performance of resource-abundant low-income countries by reinforcing the rationale for the sound management of natural resources and also by providing an index of policy sustainability in the form of the net saving rate. This policy index, along with other measures such as a capital fund for sterilizing the rent, initiatives to increase the transparency of rent flows and the rigorous evaluation of alternative uses of additional public sector revenue can improve the efficiency by which natural resource rent is transformed into alternative forms of capital to sustain rising social welfare. Chad and Mauritania provide case studies to illustrate how SEEA and net saving can be used to diagnose policy failure and improve economic performance.     

Regime types,ideological leanings,and the natural resource curse

While many consider institutional quality as a central explanatory variable when finding what causes the variance in per capita GDP growth performance of resource-abundant countries, this paper attempts to focus on more structural factors: regime type and its ideological approaches to economic policy. Several joint effects of natural resource abundance and regime type on growth are found. The natural resource curse is likely to be more severe in authoritarian regimes than democratic regimes. Among democracies, it is found that the natural resource curse is more salient in presidential regimes than in parliamentary regimes. This paper also suggests that the natural resource curse is more likely when a certain type of democratic regime coincides with a particular ideological orientation of the regime with respect to economic policy. Presidential democracies with left-wing economic policy are found to be least growth enhancing among the combinations between regime type and its economic ideology offered, given similar levels of natural resource abundance.     

Empirical evidence on the resource curse hypothesis in oil abundant economy

This present study investigates the relationship between natural resource abundance and economic growth for Venezuelan economy. We have applied the ARDL bounds testing approach to cointegration developed by Pesaran et al. (2001) to examine its long run relationship amid the variables. The VECM Granger causality is applied to test the direction of causality among the variables. This study covers the period of 1971–2011.Our empirical evidence indicated that variables are found to be cointegrated. The results confirm that natural resource abundance impedes economic growth. Financial development, capital stock and trade openness enhance economic growth. The feedback hypothesis is also found between natural resource abundance and economic growth.     

Poverty and the resource curse: Evidence from a global panel of countries

This paper contributes to the literature in an attempt to shed further light on the mixed evidence about the link between poverty and the abundance of natural resources, i.e. the resource curse hypothesis effect. It makes use of a large country sample, the Headcount Poverty Index, and a number of panel data methodological approaches, spanning the period 1992–2014. The findings document that fossil energy resources exacerbate poverty, while both democracy and economic freedom alleviate it, with corruption increasing it. These results highlight the need these economies to reinvestment their energy revenues in social programmes.     

Transmission channels of the resource curse in Africa: A time perspective

Most sub-Saharan African countries share the following characteristics: a strong dependence on natural resources, weak institutions, and relatively low growth levels preventing them to catch up with the rest of the developing world. This paper aims to unfold the natural resource curse by introducing a time perspective: long-term versus short-term effects. Following the two-step Engle and Granger procedure, an error-correction model is performed after a cointegration estimation. In addition, the paper clusters the countries to differentiate the natural resource curse mechanisms by level of institutional quality. Results are three-fold. On the long run, the negative impact of the dependence is confirmed for all categories. Countries with weak institutions are more vulnerable to the curse because the resource dependence not only negatively impacts long-term growth but also adversely impacts the recovery process. Finally, in a strong institutional environment, results point towards a potential positive impact of natural resources during recovery process.     

The pattern of specialization and economic growth: The resource curse hypothesis revisited

This paper explores the relation between countries’ pattern of trade specialization and long-term economic growth. It shows that countries specializing in the export of natural resource based products only fail to grow if they do not succeed in diversifying their economies and export structure. This conclusion follows from an empirical investigation that has three innovative features. First, it uses a dynamic panel data analysis. Secondly, it employs disaggregated trade data sets to elaborate different measures of trade specialization that distinguish between unprocessed and manufactured natural resource products and are informative about the countries’ trade diversification experience, their link to world demand trends and involvement in intra-industry trade. The final innovative aspect of the paper relates to our empirical findings: it is only specialization in unprocessed natural resource products that slows down economic growth, as it impedes the emergence of more dynamic patterns of trade specialization.     

New wine in old wineskins? Growth,terrorism and the resource curse in sub-Saharan Africa

Since 1995, growth in sub-Saharan Africa has averaged more than 5% per year reversing a two-decade decline of real income per capita. In this paper, we explore the extent to which the nascent growth is sustainable or not due to higher incidences of terrorism and commodity price declines. Our analysis is based on a rich unbalanced panel data set with annual observations on 46 countries from 1968 to 2004. We explore these data with cross-sectional and panel growth regression analysis and quantile regressions. We estimate the economic and statistical effect of terrorism on growth in sub-Saharan Africa, controlling for a variety of other factors. We then investigate the extent to which there appears to be a structural break in the estimated relationships. We find that the terrorist-oriented fragility of sub-Sahara has increased in the most recent period. We find that most of the fragility can be explained by the growth in countries that are primary fuel exporters. Indeed, our evidence points to the fact that resource-rich countries have not done an adequate job of investing in counter-terrorist policies.     

“资源诅咒”与我国资源型城市可持续发展路径

当前,我国资源型城市面临可持续发展问题,资源诅咒的幽灵在影响着资源开发和资源型城市发展。资源诅咒在我国资源型城市发展中有一定的适应性,通过有效路径选择可以规避资源型城市发展中的资源诅咒现象。     

中国西部地区的能源开发与经济增长——基于"资源诅咒"假说的实证分析

Based on resource curse hypothesis, this paper carries out an econometric analysis on the relationship and its transmission mechanism between energy exploitation and economic growth with cross-province panel data over 1991–2006. Results reveal that there is the significantly negative correlation between energy exploitation and economic growth, which indicates since the 1990s, the resource curse effect from energy exploitation has appeared evidently; though, before the implementation of the Western development strategy, energy exploitation acted negatively on opening degree, S&T innovation and human capital input, the effect was yet uncreated. However, after the implementation of the strategy, the effect emerged evidently as a result of the enhanced negative effect of energy exploitation on S&T innovation and human capital input. Moreover, further tests indicate that energy exploitation impeded economic growth mainly through three indirect transmission channels: The crowding-out effect towards human capital input and S&T innovation, and the weakening of institution aroused by rent-seeking and corruption. And among them, human capital input is the strongest transmission factor. __________ Translated from Jingji yanjiu 经济研究 (Economic Research Journal), 2008, (4): 147–160     

Fiscal Constitutions

In this paper we examine how taxes, subsidies and the design of constitutional agendas should be regulated in order to allow for an efficient allocation of public goods and a limitation of tax distortions. We show that if public goods are socially desirable, the simple majority rule, combined with taxation constrained to majority winners or a ban on subsidies, can achieve several desirable objectives. Equal treatment regarding taxes and subsidies is undesirable. Super majority rules and equal treatment of all citizens with respect to taxes and subsidies, however, are first-best provided public goods are socially undesirable. Finally, we suggest that constitutions with amendments eliminate excessive taxation and allow treatment rules to universally improve welfare.     

Fiscal Constitutions

We study the impact of fiscal constitutions on intergenerational transfers in an overlapping generation model with linear technology. Transfers represent outcomes of a voting game among selfish agents. Policies are decided one period at a time. Majoritarian systems, which accord voters maximum fiscal discretion, sustain all individually rational allocations, including dynamically inefficient ones. Constitutional rules, which give minorities veto power over fiscal policy changes proposed by the majority, are equivalent to precommitment. These rules eliminate fluctuating and dynamically inefficient transfers and sustain weakly increasing transfer sequences that converge to the golden rule. The golden rule allocation is the unique outcome of Markov constitutional rules. Journal of Economic Literature Classification Numbers: D72, H55.     

Stability of Constitutions

Constitution is a pair of rules   ( s ,  S )   that are used in a voting situation. The rule  s  is used to vote about the existing alternatives and the rule  S  is used to vote about changing the rule  s  to some other rule    s '  . We consider what kind of constitutions are likely to emerge as prominent ones if the constitutions contain more than just two rules. In a constitution that contains any number of rules the  n th rule is used to decide about the    n  − 1 th   rule. We define a notion of stability for the constitutions and show that all stable constitutions roughly contain the same rule from    n  = 2   onwards. This is one explanation to the casual observation that the constitutions have usually only two rules.     

Matching with noise and the acceptance curse

This paper explores matching with both search and information frictions. Specifically, everyone observes only a noisy signal of the true type of any potential mate. In this context, matching decisions must incorporate not only information about a partner's attribute conveyed by the noisy signal, but also—as in the winner's curse in auction theory—information about a partner's type contained in his or her acceptance decision.We show that there exists an equilibrium exhibiting a stochastic positive assorting of types, generalizing [Becker, J. Polit. Economy 81 (1973) 813-846]. In equilibrium, selection is adverse: being accepted reduces an agent's estimate of a potential partner's type, a phenomenon that we call the acceptance curse effect.     

The insider's curse

The paper shows that in an open-ascending bid auction with multi-dimensional uncertainty about private and common value components, private information about the common value has negative value for a bidder if there are sufficiently many bidders. We discuss the role of the visibility of bids and the multi-dimensionality of private information for this result.     

On Amending Constitutions

Bruce Ackerman has described three occasions upon which the U.S. Constitution underwent a massive transformation, and one failed attempt to bring about such a transformation. Only one of the major transformations that actually took place took the form of amendments to the Constitution, and even these did not follow the procedures laid down in the Constitution. This has led Ackerman to propose alternative amendment procedures. In this article, I discuss the ideal procedures for amending a constitution, Ackerman's proposal, and my own preferred alternative.     

The Nature of Constitutions

Following Thomas Hobbes, public-choice economists have theorized that constitutions arise from agreements among subordinates to establish private rules for their own transactions with each other. They then supposedly delegate to a sovereign the obligation to enforce these rules. The sovereign then violates the constitution by instituting wrong-headed rules to govern the subordinates' relations with each other. Instead, it seems more realistic to see constitutions as arising from subordinates' agreements with each other to resist excessive appropriations by the sovereign. An advanced constitution is a substitute for this original type of agreement, which only works well when the subordinates' numbers are small, as in some hunter-gatherer societies. An advanced constitution arises only from subordinates' threats of the sovereign and marshals the sovereign's own instruments of force against him.     

The curse of aid

Foreign aid provides a windfall of resources to recipient countries and may result in the same rent seeking behavior as documented in the “curse of natural resources” literature. In this paper we discuss this effect and document its magnitude. Using panel data for 108 recipient countries in the period 1960–1999, we find that foreign aid has a negative impact on institutions. In particular, if the foreign aid over GDP that a country receives over a period of 5 years reaches the 75th percentile in the sample, then a 10-point index of democracy is reduced between 0.5 and almost one point, a large effect. For comparison, we also measure the effect of oil rents on political institutions. We find that aid is a bigger curse than oil.