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

The intensification of the public debate on governance, together with the increased emphasis on governance issues in policy deliberations, have served to direct a considerable research effort at the examination of the effects of institutional quality on economic performance. Many recent studies, for example North (1990) and Schleifer and Vishny (1993), have argued that malfunctioning government institutions severely harm economic performance through a reduction in both incentives and opportunities to invest and innovate. Among the different aspects of governance, corruption has received particular attention by both policy makers and researchers as the recent availability of corruption measures has helped to quantify its extent and allowed international comparisons. In a pioneering study, Mauro (1995) emphasizes that corruption may constitute a significant obstacle to investment. Nevertheless, different economic aspects of the corruption issue remain unexamined. In particular, the determinants of corruption and its effect on growth through channels other than investment have so far received scant attention.