The Main Results of Resource Rents and Income Per Capita Link

Table 3: Regression Results, 1991-2000

Dependent Variable: GDP per capita growth
(1)	(2)	(3)	(4)

lgdpea70	0.602**	-0.0505	0.507	-0.0405
	(0.278)	(0.357)	(0.312)	(0.356)
FDI	0.145**	0.0901	0.141**	0.0870
	(0.0646)	(0.0633)	(0.0644)	(0.0637)
RR	-0.0494***	-0.0183	-0.0806**	0.0109
	(0.0170)	(0.0206)	(0.0386)	(0.0472)
Inst		4.257***		4.709***
		(1.228)		(1.202)
RRInst*			0.0776	-0.0645
			(0.0885)	(0.1000)
Constant	-3.291	-0.568	-2.577	-0.871
	(2.205)	(2.408)	(2.437)	(2.488)

Observations
R-squared	0.152	0.254	0.160	0.259

Robust standard errors in parentheses

*** p<0.01, ** p<0.05, * p<0.1

Table 4: Regression Results, 2001-2010

Dependent Variable: GDP per capita growth
(1)	(2)	(3)	(4)

lgdpea70	-0.386	-1.138***	-0.674**	-1.144***
	(0.292)	(0.377)	(0.298)	(0.379)
FDI	0.105***	0.117***	0.146***	0.127***
	(0.0329)	(0.0335)	(0.0375)	(0.0317)
RR	0.0158	0.0436**	-0.0465*	0.0237
	(0.0172)	(0.0167)	(0.0251)	(0.0360)
Inst		4.690***		4.233***
		(1.256)		(1.419)
RRInst*			0.151***	0.0416
			(0.0527)	(0.0621)
Constant	5.081**	8.139***	7.096***	8.396***
	(2.354)	(2.478)	(2.363)	(2.489)

Observations
R-squared	0.074	0.241	0.148	0.245

Robust standard errors in parentheses

*** p<0.01, ** p<0.05, * p<0.1

Conclusion

The results of the study are relatively stark given that it is a case study. The bottom line econometrics of this study is to examine that natural resource endowments are bad for economic growth via institutional quality rather than its direct resource impact.[7] It is documented that resource share in income has negative effect on institutional qualityand thus undermines economic growth. Comparing two subsamples we evidence that direct resource curse impact maz disappear while indirect one (through institutional quality) is true for all subsamples implying that resource curse via institutions are much more important link of natural resources and economic growth. The resource rents and its appropriateness (easiness) to extract, particularly point source resources, attract the different groups to seize the control of these resources and the windfall of revenues by utilizing them. This, in turn, triggers non-efficient institutional activities.

Thus, the impact of the resource abundance on economic growth is indirect, through institutional quality. The resource concentration undermines the growth only through its impact on institutional quality. Heavy concentration on resource rents generates “grabber friendly” institutions and consecutively causes economic failure. In this regard, the more transparency and political accountability in management of specific point-source resources (e.g. oil production) are key is bullet policy recommendation of this investigation. Lack of transparency makes point-source resource appropriable to rent seeking and inefficient utilization. In addition, overly complicated rules and regulation just gives some groups the opportunity to extract bribes. Lack of transparency and burdensome regulations, rules are key issues to be tackled in managing specifically point-source resources. Ease of doing business is crucial as firms could be squeezed by enormous regulations and burdensome institutions. Excessive regulations and rules set by burdensome institutions tie small businesses’ success to inefficient institutional practices. On the other hand, under transparent business regulation regime the key drivers of economy, small businesses are motivated to carry out business further.

References

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AUTY, R., 1997. Natural Resource Endowment, the State and Development Strategy. Journal of International Development 9(4), 651-663.

AUTY, R., 2001. Resource Abundance and Economic Development, Oxford University Press.

BOSCHINI, A. D., J. PETTERSON, and J. ROINE, 2007. Resource Curse or Not: A Question of Appropriability. Scandinavian Journal of Economics 109(3), 593–617.

BRUNNSCHWEILER, C. N., 2008. Cursing the Blessings? Natural Resource Abundance, Institutions, and Economic Growth. World Development, 36(3), 399-419.

ISHAM, J., M. WOOLCOCK, L. PRITCHETT, and G. BUSBY, 2005. The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth. World Bank Economic Review, 19(2), 141–174.

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SACHS, J.D., and A.M. WARNER, 1999. The Big Push, Natural Resource Booms, and Growth. Journal of Economic Development Economics 59 (1), 43-76.

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[1] See also Gelb (1998), Lane and Tornell (1996) and Gylfason et al. (1999)

[2] Some of the manufacturing goods concentrated and non-resource countries are not included

[3] See the detailed description of a measure in the further sections

[4] Following Auty (1997), Woolcock et al. (2001) and Isham et al. (2005) on important role of types of natural resources in defining the quality of institutions

[5] The sample is split into two according to level of institutional quality (CIM – Contract-Intensive Money – a measure will be discussed in further sections in detail)

[6] See for instance recent studies of Mehlum et al. (2006), Brunnschweiler (2007), Boschini et al. (2007)

[7] As observe in two influential papers by Sachs and Warner (1995, 1999)