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Energy: Its Relationship to Dutch Disease, Resource Curse, Governance and Democracy

Energy: Its Relationship to Dutch Disease, Resource Curse, Governance and Democracy. 18 Nov 09. Background. Resource rich countries develop slower than resource poor countries Dutch Disease Resource rich countries tend to be more authoritarian, violent and corrupt Resource Curse

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Energy: Its Relationship to Dutch Disease, Resource Curse, Governance and Democracy

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  1. Energy: Its Relationship to Dutch Disease, Resource Curse, Governance and Democracy 18 Nov 09

  2. Background • Resource rich countries develop slower than resource poor countries • Dutch Disease • Resource rich countries tend to be more authoritarian, violent and corrupt • Resource Curse • Is there a link between resource abundance and lack of democracy?

  3. Source: Energy Information Administration

  4. Source: Nation Master

  5. Saudi Arabia Nigeria UAE Kuwait Iran Norway Algeria Venezuela Iraq Kazakhstan Qatar Canada Sources: Energy Information Administration & Nation Master

  6. Source: Energy Information Administration

  7. GDP ($B)Oil Revenues ($B) 61.6% 14.5% 54.5% 21.3% 71.4% 16.4% 81.5% 18% 33% 39.7% 60% 30% 2.7% 46% Sources: World Bank & Energy Information Administration

  8. Does Oil Hinder Democracy? • Rentier Effect • Taxation Effect • Spending Effect • Group Formation Effect • Repression Effect • Modernization Effect • Dutch Disease and Resource Curse = Lower Growth

  9. Dutch Disease • Symptoms: • Natural Resource Boom = Deindustrialization • Resource Movement Effect • Spending Effect • Rise in exchange rate = decreased competitiveness • Protectionist Policy • Remedies • Sovereign Wealth Funds • Fiscal Policy

  10. Resource Curse • Symptoms • Lower Growth Rate • Increased Conflict • Poor political relationship between Rulers and Citizens • Volatility of Revenues • Corruption • Lack of Diversification • Remedies • Direct Distribution of Oil Revenues which are then taxed

  11. Pros and Cons • Plus: • Generous social services • Strong growth during boom times • Minus: • Government Fiscal Powers dampen pressure for democracy • Conflict and stronger security forces to ward off democratic pressures • Lack of occupational specialization and economic diversity

  12. Total Tax Revenues as % of GDP vs % of Tax Revenues from Oil(2008) Norway Russia Canada Total Tax Revenues as % of GDP Venezuela Algeria Nigeria Iran Saudi Arabia Angola Libya UAE Kuwait % of Tax Revenues from Oil Sources: OECD & Economist

  13. Taxes vs Democracy(2008) Norway Russia Canada Total Tax Revenues as % of GDP Kazakhstan Venezuela Algeria Iran Saudi Arabia Nigeria Angola Qatar Libya Kuwait UAE Democracy Index Score Sources: OECD & Economist

  14. Democracy vs % of Tax Revenues from Oil(2008) Norway Canada Democracy Index Score Venezuela Iraq Russia Kuwait Nigeria Algeria Iran Angola UAE Libya Saudi Arabia % of Tax Revenues from Oil Sources: OECD & Economist

  15. % of GDP from oil vs GDP Growth Rate(2008) Qatar Angola GDP Growth Rate Kuwait Iraq Iran UAE Libya Nigeria Russia Venezuela Saudi Arabia Algeria Kazakhstan Norway Canada % of GDP from Oil Sources: CIA World Fact Book , EIA, and World Bank

  16. % of GDP from oil vs Voice and Accountability(2008) Canada Norway Kuwait Venezuela Nigeria Qatar Russia UAE Kazakhstan Algeria Angola Iraq Iran Saudi Arabia Libya Sources: World Bank and EIA

  17. % of GDP from oil vs Political Stability(2008) Canada Norway Qatar UAE Kazakhstan Libya Kuwait Angola Saudi Arabia Russia Iran Algeria Venezuela Nigeria Iraq Sources: World Bank and EIA

  18. % of GDP from oil vs Government Effectiveness(2008) Canada Norway Qatar UAE Kuwait Saudi Arabia Russia Kazakhstan Algeria Iraq Angola Venezuela Iran Nigeria Libya Sources: World Bank and EIA

  19. % of GDP from oil vs Regulatory Quality(2008) Canada Norway Qatar UAE Saudi Arabia Kuwait Kazakhstan Russia Nigeria Algeria Angola Libya Iraq Venezuela Iran Sources: World Bank and EIA

  20. % of GDP from oil vs Rule of Law(2008) Norway Canada UAE Qatar Kuwait Saudi Arabia Iran Russia Libya Algeria Kazakhstan Angola Nigeria Iraq Venezuela Sources: World Bank and EIA

  21. % of GDP from oil vs Control of Corruption(2008) Canada Norway Qatar UAE Kuwait Saudi Arabia Algeria Libya Iran Russia Nigeria Angola Kazakhstan Venezuela Iraq Sources: World Bank and EIA

  22. % of GDP from oil vs Average Governance Indicator(2008) Canada Norway UAE Qatar Kuwait Saudi Arabia Algeria Kazakhstan Russia Angola Libya Nigeria Iran Venezuela Iraq Sources: World Bank and EIA

  23. Works Studied • Does Oil Hinder Democracy? • by Michael L. Ross • Oil, Corruption and the Resource Curse • by Nicholas Shaxson • Natural Resource Abundance and Economic Growth • by Jeffrey D. Sachs and Andrew M. Warner

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