The paper tests the hypothesis that the effect of resources on growth is conditional on the quality of institutions, by further building on Mehlum, Moene, and Torvik’s (2006b) influential work. Advances are made by re-testing the hypothesis, using: (a) a dataset of up to 53 countries over the period 1984-2003; and (b) a resource abundance indicator that focuses on non-renewable resources alone rather than the ones commonly used in the literature that include renewable resources, which are inappropriate. The empirical results of the paper confirm the hypothesis that resource rich economies are not destined to be cursed if they have good institutions.

 

Keywords: World economic growth, resource curse, institutions