Oil, institutions and growth.

This research study presents a review of the vast literature on the term 'resource curse', focusing particularly on the question whether natural resource abundance is really bad for economic growth and development. The study observes that, while the existing literature provides considerable evidence that natural resource abundance is associated with negative development outcomes, the evidence is by no means conclusive nor robust, after controlling for the empirical errors associated with the estimation methodologies adopted in such analysis. The research investigates the consistency and robustness of the different estimation methodologies hitherto used to explain the slow and volatile growth performance of developing oil-rich countries. Firstly, the research empirically establishes whether oil, as a natural resource endowment, is a significant determinant of economic growth and by extension, whether the negative correlation between natural resource abundance and long-term economic growth is necessarily significant, after controlling for model endogeneity and country- specific heterogeneity errors. Secondly, the study investigates whether 'oil boom' accounts for the decline in manufacturing output and economic growth in developing oil rich countries as the 'Dutch Disease Hypothesis' suggests. Thirdly, the research establishes a strong correlation between the quality of institutions and the current growth performance of developing oil economies. In this research, rather than ask the usual question - why natural resource wealth promotes poor growth performance. We answer the question - what fundamental factors enable some resource abundant countries to utilize their natural resource advantages to promote steady growth and development, while others could not. The thesis suggests that institutions are important to unravelling the resource curse dilemma, and until fundamental institutional re-engineering of the economies of developing oil-rich countries is embarked upon, the gains from a resource boom cannot be transformed into a sub- optimal development outcome. This necessary institutional revival will require a radical departure from the historically inherited 'extractive' colonial institutions - which currently characterize developing oil exporting countries