Content area
Full Text
Abstract
This paper compares Algeria to Norway in the context of the resource curse theory. This paper uses Algeria as a case study where the natural resource curse is contrasted with the argument that the problem is to be found in weak or ill-designed institutions: namely, that the problem of underdeveloped countries with valuable resources is an institutional one. An alternative explanation for the presumed ills of oil-rich nations examines the role of weak or ill-designed institutions. We find that from 1970 through 2010, Algeria's short-, medium-, and long-term growth rates are not affected by the presence of natural resource rents in an economically significant way. We argue that the role of institutions advances a more consistent explanation for the much-discussed and analyzed alleged negative impact of natural resources on the economy, and offers a way out of economic underperformance in terms of policy implications.
JEL Codes: O13, O43, O47
Keywords: Algeria, resource curse, oil curse, institutions, democracy
I. Introduction
Endowed with natural resources, Algeria should have done well in the fifty-plus years since it gained independence from France in 1962. But it has yet to make measurable progress on both the economic and political fronts. The country has stumbled from one turning point to another, all marked by the direct or indirect influence of the military. There is no political class in the true sense of the word, despite the multitude of parties that proliferated after the October 1988 riots. On the economic front, Algeria has relied on the oil and gas sector and has failed to diversify its economy and to create muchneeded jobs for the millions of disaffected youth.
In exploring the oil and democracy theme, this paper compares Algeria to Norway in the context of the resource curse theory. An extensive literature on this subject has concluded that countries rich in natural resources exhibit low rates of economic growth (De Mesquita and Smith 2011; Karl 1997; Ross 2012; Sachs and Warner 1995). An alternative explanation for the presumed ills of oil-rich nations examines the role of weak or ill-designed institutions. Similar to Ploeg (2011), we argue that the role of institutions advances a more consistent explanation for the much-discussed and analyzed alleged negative impact of natural resources on a country's...