nep-res New Economics Papers
on Resource Economics
Issue of 2006‒09‒23
one paper chosen by
Maximo Rossi
Universidad de la Republica

  1. Windfall Gains, Political Economy, and Economic Development By Dalgaard, Carl-Johan; Olsson, Ola

  1. 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

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