Jørgen Juel Andersen

The big oil change: a closer look at the Haber-Menaldo analysis

The claim that oil wealth tends to block democratic transitions has recently been challenged by Haber and Menaldo, who use historical data going back to 1800 and conclude there is no “resource curse.” We revisit their data and models, and show they might be correct for the period before the 1970s, but since about 1980, there has been a pronounced resource curse. We argue that oil wealth only became a hindrance to democratic transitions after the transformative events of the 1970s, which enabled developing country governments to capture the oil rents that were previously siphoned off by foreign-owned firms. We also explain why the Haber–Menaldo study failed to identify this: partly because the authors draw invalid inferences from their data and partly because they assume that the relationship between oil wealth and democracy has not changed for the past 200 years.

The Dutch Disease and Intergenerational Welfare

Governments in resource abundant economies face a tradeoff between transferring wealth to present generations and saving for future generations. Employing an overlapping generations framework with endogenous growth, this article analyses the intergenerational welfare effects of: (1) a wealth transfer policy where the entire wealth is transferred to the generations alive at present; (2) an income transfer policy where the wealth is saved and the permanent income of the wealth is transferred to all present and future generations, forever. Not surprisingly, present generations are unambiguously better off with the wealth transfer policy. Less trivially, however, the wealth transfer policy can be associated with higher welfare also for future generations. The intuition for this result is that while a wealth transfer depresses growth only in the periods subsequent to the transfer, income transfers constitute a permanent drag on growth. Perhaps counter to the naïve intuition, the policy of saving the wealth and distributing the permanent income to all present and future generations is less beneficial for the future generations if the real return to saving is high.