Windfall Gains, Political Economy, and Economic Development

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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.

SAMHÄLLSVETENSKAP Ekonomi och näringsliv Nationalekonomi hsv//swe
SOCIAL SCIENCES Economics and Business Economics hsv//eng
institutions; aid; natural resources; windfall gains; economic growth; corruption; rule of law

Olsson, Ola,1971Gothenburg University,Göteborgs universitet,Institutionen för nationalekonomi med statistik,Department of Economics(Swepub:gu)xolola (författare)
Göteborgs universitetInstitutionen för nationalekonomi med statistik (creator_code:org_t)

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SAMHÄLLSVETENSKAP: SAMHÄLLSVETENSKA ...; och Ekonomi och näri ...; och Nationalekonomi

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