Friday, July 31, 2009

Education, natural resources and corruption

Poor countries are cursed by corruption, low human capital and an economy mostly based on natural resources. These three factors have often been treated as exogenous to GDP and in particular to each other. But could they be linked? The correlation is certainly there, what about causation?

Iván Aldave and Cecilia García-Peñalosa make the argument that the "blessing" of natural resources gives the wrong incentives: why get educated when the soil is rich without effort? This is something we already knew, see for example how rich countries without natural resources are (see: Alps, Scandinavia, Great Britain). But the link from natural resources to corruption is more intriguing. Natural resources are generally state owned, thus more prone to rent seeking than, say, manufacturing. The more natural resources, the more you want to invest in political capital to the detriment of other forms of capital.

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