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.


Dr William J McKibbin said...

Your proposition that there is correlation between naturual resources and corruption is quite interesting. When I consider a simiilar proposition between education and corruption, I'm equally intrigued. Thanks for the ideas.

Olga said...

This needs a more thorough investigation before jumping to causation.
With respect to corruption-national resources link,I see too many exceptions; poor countries with little to no natural resources, high education levels, still drowning in corruption...

In modern predatory states, bribing authorities is common in every profitable economic activity, for the sake of your business. It makes no difference if you are interested in investing in local natural resources, or services; the rules of the game set by political powers will work against in any case, forcing you to bribe, pay bankrupting taxes, or move out of the way. There you bribe because they are in your way; it's the thing to do to be able to get around with your own business, irrespective of your gains/losses from the poorly managed "national interest" resources.