| By: |
Dalgaard, Carl-Johan (University of Copenhagen, Department of Economics);
Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: |
Natural resource rents and foreign aid have the character of windfall gains
that affect economic outcomes both directly and indirectly. Several studies
have shown that the indirect effect typically works via institutions like
corruption. In this article, we offer a theoretical framework for a joint
analysis of how natural resources and aid potentially affect total output in
society through rent seeking activities. We survey the existing evidence on
both direct and indirect effects of windfalls and provide some new empirical
evidence of the association between aid/natural resources and institutions in
a large cross-section of countries. Our results suggest that whereas more aid
means less corruption, natural resource rents is positively correlated with
corruption, although both relationships are nonlinear. <p> |
| Keywords: |
institutions; aid; natural resources; windfall gains; economic growth; corruption; rule of law |
| JEL: |
F35 O11 |
| Date: |
2006–09–05 |
| URL: |
http://d.repec.org/n?u=RePEc:hhs:gunwpe:0223&r=res |