Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth

IMF Working Papers, July 1, 1999

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Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth

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Bibliographic details

• Authors: Carlos A Leite, Jens Weidmann
• Published: July 1, 1999
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451850734.001

Summary

• Authors: Carlos A Leite, Jens Weidmann
• Publication date: July 1, 1999
• Core argument: Natural resource abundance creates opportunities for rent-seeking behavior and is an important factor in determining a country’s level of corruption.
• Method: A simple growth model illustrating interrelationships between natural resources, corruption, and economic growth; discussion of potential anti-corruption policies; empirical corroboration in a cross-country framework with both corruption and growth endogenized.
• Key thematic takeaway: The extent of corruption depends on natural resource abundance, government policies, and the concentration of bureaucratic power. The growth effects of natural resource discoveries and anticorruption policies crucially depend on the economy’s state of development.

Model and findings

• Model type: neoclassical growth model, open economy extension.
• Main theoretical relationships illustrated:
  • Natural resources ↔ opportunities for rent-seeking behavior ↔ level of corruption.
  • Corruption and growth are endogenous and interrelated within the model.
  • The concentration of bureaucratic power mediates the relationship between resource abundance and corruption.
• Growth implications:
  • Growth effects of natural resource discoveries depend on the economy’s state of development.
  • Growth effects of anticorruption policies depend on the economy’s state of development.

Empirical evidence

• Approach: Cross-country framework with both corruption and growth endogenized.
• Empirical result summarized: The paper empirically corroborates the model’s implications.

Policy recommendations and discussion

• Discusses potential anti-corruption policies (specific policies are discussed in the paper; summary notes their importance and that their growth effects vary with the economy’s development stage).
• Emphasizes the role of government policies and bureaucratic power concentration in shaping corruption outcomes.

Subject areas and keywords

• Subject: Commodity prices, Corruption, Crime, Environment, International trade, National accounts, Natural resources, Personal income, Prices, Trade policy
• Keywords: Africa, anti-corruption policies, Commodity prices, corruption, cross-country study, economic growth, economic system, extraction activity, goods sector, natural resource, natural resources, neoclassical growth model, open economy, Personal income, resource boom, shadow price, terms of trade, Trade policy, WP

Content in this bundle

• Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth - WP/99/85
  • Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth - WP/99/85 (Markdown version)
  • Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth - WP/99/85 (PDF)