Political Economy Models of the Resource Curse: Implications for Policy and Research

The paper examines the 'resource curse'—the tendency for resource-rich countries to experience low economic growth—through centralised and decentralised political economy models. It argues that the curse is not inevitable but depends on the presence of 'impartiality-enhancing institutions' that curb favouritism and rent-seeking. The authors critique current donor initiatives, such as the EITI and Norway's Oil for Development programme, for focusing too narrowly on revenue transparency and technical capacity rather than the broader institutional reforms and societal accountability required to address the root causes of the curse.

• The authors introduce the concept of 'impartiality-enhancing institutions' to describe rules and structures that reduce the attraction of favouritism and patronage in favour of the general public interest, thereby mitigating the negative effects of natural resource rents.
• Centralised political economy models suggest that resource abundance can lead to a curse if governments use revenues for patronage to secure power, but the outcome is ambiguous as resources could also be used for productive general spending or to lengthen a politician's planning horizon.
• Decentralised political economy models, or rent-seeking models, argue that the resource curse occurs when low institutional quality creates a 'grabber equilibrium,' where entrepreneurs shift effort from productive activities to rent-extracting activities, potentially leading to a net negative effect on income.
• The Extractive Industries Transparency Initiative (EITI) is critiqued for focusing exclusively on the revenue collection side of transparency while ignoring the expenditure side, which is where patronage and the misallocation of resources typically occur.
• The Norwegian Oil for Development programme is assessed as being too narrow and sector-specific, focusing on technical capacity building rather than the vertical and societal accountability (such as a free press and democratisation) necessary for institutional change.
• The authors argue that previous research has been misled by focusing on 'natural resource abundance' (physical reserves or export shares) rather than 'rents,' which are the actual drivers of the political and economic mechanisms behind the resource curse.

APA

Kolstad, I., & Wiig, A. (2009). Political Economy Models of the Resource Curse: Implications for Policy and Research. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2009/09/Occasional-Paper-40.pdf

Chicago

Kolstad, Ivar, and Arne Wiig. Political Economy Models of the Resource Curse: Implications for Policy and Research. South African Institute of International Affairs, 2009. https://saiia.org.za/wp-content/uploads/2009/09/Occasional-Paper-40.pdf.

Wikipedia

{{cite report |last1=Kolstad |first1=Ivar |last2=Wiig |first2=Arne |title=Political Economy Models of the Resource Curse: Implications for Policy and Research |publisher=South African Institute of International Affairs |date=September 2009 |url=https://saiia.org.za/wp-content/uploads/2009/09/Occasional-Paper-40.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kolstad2009political, author = {Kolstad, Ivar and Wiig, Arne}, title = {{Political Economy Models of the Resource Curse: Implications for Policy and Research}}, institution = {South African Institute of International Affairs}, year = {2009}, month = sep, url = {https://saiia.org.za/wp-content/uploads/2009/09/Occasional-Paper-40.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }