The Rentier Predatory State: An Empirical Investigation of the 'Resource Curse'

Abstract

This paper introduces an empirical growth model that explains the observed perplexing growth-resource regime, dubbed the resource curse. The main hypothesis introduced here, the rentier predatory state hypothesis, holds that under autocracy, the interaction between political power and resource abundance is expected to lead to poor economic outcomes in long run. In the empirical model, resource abundance is allowed to interact with political repression to generate a negative impact on economic growth. Depending on the extent of the political repression, a state dependent on natural resources (a rentier state) can also become a predatory state, i.e., a rentier predatory state, or, in other words, a rentier state with high rate of political repression. The resulting net effect from natural resource abundance on economic growth is contingent on the extent of the repression, and a resource abundant state with a sufficiently high rate of political repression will have negative economic growth, while a state with low to moderate rate of political repression will have positive economic growth.