Do sovereign wealth funds mitigate authoritarian rule?: a statistical analysis of sovereign wealth funds and the resource curse.

Abstract

DO SOVEREIGN WEALTH FUNDS MITIGATE AUTHORITARIAN RULE? A STATISTICAL ANALYSIS OF SOVEREIGN WEALTH FUNDS AND THE RESOURCE CURSE G. Jason Smith December 6, 2010 The famous oil baron' John Paul Getty once defined his secret to success in three parts, Rise early, work hard, strike oil. This recipe, however, has not lead to political and economic success for oil-reliant, emerging market states. Rather than experiencing a resource blessing, these states have been plagued by a resource curse. This project introduces and tests my theory that sovereign wealth funds offer an exit to the resource curse and pathway back to the resource blessing. This theory is based on two observations I noticed during previous research on the subject: states with sovereign wealth funds boost occupational specialization and government transparency. Since both of these factors are believed to be necessary for democratization, then states with sovereign wealth funds should be less authoritarian. My findings suggest that the political transparency claim is true and that sovereign wealth funds do increase occupational specialization. However, the findings also suggest that occupational specialization is no longer a causal mechanism of the resource curse.