Institutions and the Volatility Curse

Abstract

This paper revisits the resource curse paradox and studies the impact of resource rents and their volatility on economic growth under varying institutional quality. Using …ve-year non-overlapping observations between 1970 and 2005 for 112 countries, we …nd that while resource rents enhance real output per capita, their volatility exerts a negative impact on economic growth. Therefore, we argue that volatility, rather than abundance per se, drives the resource curse. However, we also …nd that higher