Grounded in geology
Let’s say country X is sitting on an abundance of oil reserves. If its institutions are strong and stable — think Norway — then society will benefit. If, on the other hand, its institutions are precarious — think Nigeria — then this resource will lead to negative outcomes, such as weaker democracy, less economic growth, and more corruption. Right? Well, yes … and no. According to political economist Renato Lima de Oliveira, a PhD candidate in the Department of Political Science, it’s more complicated than the "resource curse" literature reflects: Those natural resources, he says, can actually influence how institutions are built. In the case of state-owned companies producing oil that is easy to extract, with a large margin between the cost of production and the selling price (known as low-cost oil), most of the profits go to government. And rather than invest in infrastructure and human capital, individuals in government invest...