The quality of political institutions and the curse of natural resources

We propose a theoretical model to explain empirical regularities related to the curse of natural resources, which emphasises the behaviour and incentives of politicians. We extend the standard voting model to give voters political control beyond the elections. This gives rise to a new restriction that policies should not give rise to a revolution. Our model clarifies when resource discoveries might lead to revolutions, namely, in countries with weak institutions. It also suggests that for bad political institutions human capital depends negatively on natural resources, while for high institutional quality the dependence is reversed. This finding is corroborated in cross-section regressions.We gratefully acknowledge financial support from the Spanish Ministry of Science and Technology under grants CONSOLIDERINGENIO 2010 (CSD2006-0016), SEJ2006-01717 and SEJ2006-11665-C02-00.Publicad