Institutions and the “Resource Curse”: Evidence From Cases of Oil-Related Bribery

Abstract

While some resource-rich countries are highly corrupt, others have transparent and well-functioning governments. What explains this wide variation in so-called “resource-cursed” states? I show that these differences result from domestic institutional choices over how resource extraction is governed. Some governments grant procurement authority—the ability to award contracts for production rights—to state-owned enterprises, whereas others place this authority in ministries. Building upon agency theory, I argue that this choice matters: The relative political autonomy of state-owned enterprises compared with ministries fosters an opaque regulatory environment that incentivizes malfeasance. Using new data on transnational bribes in 59 oil-producing countries, I show evidence for a robust link between oil-related institutions and bribery, even after addressing the endogeneity of institutional choice via instrumental variables analysis. This research has implications not only for the political economy of the resource curse hypothesis but also for existing theories on corruption and regulatory independence.