De Rosa, DonatoIootty, Mariana2012-12-212012-12-212012-07https://hdl.handle.net/10986/11992This paper examines whether natural resource dependence has a negative influence on various indicators of institutional quality when controlling for the potential effects of other geographic, economic and cultural initial conditions. Analysis of a panel of countries from 1996 to 2010 indicates that a high degree of resource dependence, measured as the share of mineral fuel exports in a country's total exports, is associated with worse government effectiveness, as well as with reduced levels of competition across the economy. Furthermore, estimation of long-run elasticities suggests that government effectiveness and the intensity of domestic competition decrease over time as the dependence on natural resources increases. An illustration of the Russian case shows that the negative effects accumulate in the long run, leading to a worse deterioration of government effectiveness in Russia than in Canada, a country with a comparable resource endowment but far better overall institutional quality. This result is corroborated by a significant negative correlation found between regional resource dependence and an indicator of regulatory capture in Russian regions, which indicates that the regulatory environment is more likely to be subverted in regions that are more dependent on extractive industries. Overall, the findings would be consistent with a situation in which a generally weak institutional environment would allow resource interests to wield the bidding power accruing from export revenues to subvert the content of laws and regulations, as well as their enforcement. The fact that this is associated with negative externalities for the rest of the economy, notably by undermining a level playing field across non-resource sectors, sheds light on a potential channel for the resource curse.CC BY 3.0 IGOACCOUNTABILITYADVANCED ECONOMIESAGGREGATE GOVERNANCE INDICATORSAGGREGATE INDICATORSALLOCATIVE EFFICIENCYANTICORRUPTIONASYMMETRIC INFORMATIONAUCTIONAVERAGE RESPONSESBENCHMARKBONDBUSINESS DEVELOPMENTBUSINESS ENVIRONMENTBUSINESS PRACTICESBUSINESS SECTORBUSINESS SECTOR DEVELOPMENTCAPITAL INFLOWSCAUSAL EFFECTCITIZENSCIVIL SOCIETYCOALCOLLECTIVE ACTIONCOMMERCIAL RISK RATING AGENCIESCOMMODITIESCOMPARATIVE ECONOMICSCOMPETITION POLICIESCOMPETITIVENESSCONTRACT ENFORCEMENTCORRUPTIONCORRUPTION INDICATORCORRUPTION LEVELSCOUNTRY CHARACTERISTICSCOUNTRY DUMMIESCOUNTRY DUMMYCOUNTRY FIXED EFFECTSCOUNTRY REPORTSCOUNTRY SPECIFIC VARIABLESCRIMEDECENTRALIZATIONDEMOCRACYDEVELOPED COUNTRIESDEVELOPING COUNTRIESDEVELOPING ECONOMIESDEVELOPMENT ECONOMICSDEVELOPMENT PATHSDEVELOPMENT POLICYDIRECT INVESTMENTDOLLAR VALUEDOMAINDOMESTIC COMPETITIONDOMESTIC MARKETECONOMETRICSECONOMIC CONDITIONSECONOMIC CONSEQUENCESECONOMIC CRISISECONOMIC DEVELOPMENTECONOMIC FACTORSECONOMIC GROWTHECONOMIC OUTCOMESECONOMIC PERFORMANCEECONOMIC RESEARCHECONOMIC STRUCTUREECONOMIC THEORYECONOMICSELASTICITIESELASTICITYEMPIRICAL EVIDENCEEMPIRICAL STUDIESENVIRONMENTALENVIRONMENTAL ECONOMICSEXCHANGE RATEEXPORT MARKETSEXPORTSEXPOSUREFACTORS OF PRODUCTIONFINANCIAL SECTORSFOREIGN CAPITALFOREIGN DIRECT INVESTMENTFREE PRESSGDPGDP PER CAPITAGLOBAL COMPETITIVENESSGOVERNANCE INDICATORSGOVERNMENT EFFECTIVENESSGOVERNMENT EXPENDITUREGROWTH PERFORMANCEGROWTH POLICYGROWTH POTENTIALGROWTH RATESGROWTH THEORIESHUMAN CAPITALHUMAN RESOURCESINCOMEINCOME DISTRIBUTIONINCOME LEVELSINCOMESINDUSTRIAL PRODUCTIONINEQUALITYINNOVATIONINNOVATION POLICYINSTITUTIONAL ARRANGEMENTSINSTITUTIONAL ENVIRONMENTINSTITUTIONAL FRAMEWORKINSTITUTIONAL MEASURESINSTITUTIONAL QUALITYINTERNATIONAL COMPARISONINTERNATIONAL COMPETITIVENESSJUDICIAL SYSTEMJURISDICTIONLAW INDEXLEGAL ORIGINLEGAL ORIGINSLEGAL SYSTEMLIVING STANDARDSMACROECONOMIC MANAGEMENTMANUFACTURINGMARKET COMPETITIONMARKET ECONOMYMARKET REGULATIONMEASURING GOVERNANCEMETALSMONETARY ECONOMICSMONOPOLIESNATURAL RESOURCENATURAL RESOURCESNEGATIVE EXTERNALITIESNEW TECHNOLOGIESOILOIL PRICESOIL SECTOROPEN ACCESSOPERATING ENVIRONMENTOUTPUTPER CAPITA INCOMEPOLICY FORMULATIONPOLICY MAKERSPOLITICAL ACCOUNTABILITYPOLITICAL ECONOMYPOLITICAL INFLUENCEPOLITICAL INSTABILITYPOLITICAL POWERPOLITICAL STABILITYPOSITIVE EFFECTSPOSITIVE EXTERNALITIESPRIVATE SECTORPRIVATE SECTOR DEVELOPMENTPRODUCTION PROCESSPRODUCTIVITYPRODUCTIVITY GROWTHPROPERTY RIGHTSPUBLIC POLICIESPUBLIC POLICYRAPID ECONOMIC GROWTHREGRESSION ANALYSISREGULATORSREGULATORY CAPTUREREGULATORY ENVIRONMENTREGULATORY FRAMEWORKREGULATORY OUTCOMESREGULATORY QUALITYREGULATORY REGIMEREGULATORY_CAPTURERENT SEEKINGRESOURCE ALLOCATIONRESOURCE MANAGEMENTRESULTRESULTSREVERSE CAUSALITYRULE OF LAWSHAREHOLDERSSMALL BUSINESSSMALL BUSINESSESSOCIAL INTERACTIONSSTAGFLATIONSTATE CAPTURESTATISTICAL DATATAXTAX BREAKSTAXATIONTERMS OF TRADETERRORISMTHEORETICAL MODELSTRADE POLICYTRANSITION ECONOMIESTRANSMISSIONTRANSPARENCYUNOBSERVED COMPONENTS MODELVESTED INTERESTSVOLATILITYWEALTHWEBWORLD DEVELOPMENT INDICATORSWORLD TRADEWORLD TRADE ORGANIZATIONWORLDWIDE GOVERNANCE INDICATORSWorld Bank10.1596/1813-9450-6151