Environment and Development Economics



Corruption, the resource curse and genuine saving 1


SIMON DIETZ a1, ERIC NEUMAYER a1c1 and INDRA DE SOYSA a2
a1 Department of Geography and Environment and Centre for Environmental Policy and Governance, London School of Economics and Political Science, Houghton Street, London WC2A 2AE, UK
a2 Department of Sociology and Political Science, Norwegian University of Science and Technology, Trondheim, Norway

Article author query
dietz s   [Google Scholar] 
neumayer e   [Google Scholar] 
de soysa i   [Google Scholar] 
 

Abstract

Genuine saving is a measure of net investment in produced, natural and human capital. It is a necessary condition for weak sustainable development that genuine saving not be persistently negative. However, according to data provided by the World Bank, resource-rich countries are systematically failing to meet this condition. Alongside the well-known resource curse on economic growth, resource abundance might have a negative effect on genuine saving. In fact, the two are closely related, as future consumption growth is limited by insufficient genuine saving now. In this paper, we apply the most convincing conclusion from the literature on economic growth – that it is institutional failure that depresses growth – to data on genuine saving. We regress gross and genuine saving on three indicators of institutional quality in interaction with an indicator of resource abundance. The indicators of institutional quality are corruption, bureaucratic quality and the rule of law. We find that reducing corruption has a positive impact on genuine saving in interaction with resource abundance. That is, the negative effect of resource abundance on genuine saving is reduced as corruption is reduced.


Correspondence:
c1 Corresponding author. Phone: 0207-9557598. Email: e.neumayer@lse.ac.uk


Footnotes

1 Thanks to Kirk Hamilton, Anastasios Xepapadeas and two anonymous referees for many helpful and constructive comments. The usual disclaimer applies. Eric Neumayer acknowledges financial assistance from the Leverhulme Trust.