Comparative Economic Studies

, Volume 61, Issue 4, pp 531–550 | Cite as

Democratic Institutions, Natural Resources, and Income Inequality

  • Christopher A. HartwellEmail author
  • Roman Horvath
  • Eva Horvathova
  • Olga Popova


This paper examines how democratic institutions shape the nexus of natural resources and income inequality, under the hypothesis that democracy can help to alleviate the possible effects that resources may have on income inequality. Starting from a survey of the existing literature, we provide a cross-country regression analysis showing that the effect of natural resources on income inequality does indeed depend on democracy. Our results suggest that, if the level of democracy in a country is high, natural resources have the ability to lower inequality. This finding suggests several avenues for future research.


Institutions Natural resources Inequality Democracy 

JEL Classification

Q32 Q34 D73 P48 



We thank Nauro Campos, Jan Mares, and an anonymous referee for helpful comments. Horvathova acknowledges support from the Grant Agency of the Czech Republic, Grant No. 17-16633S. Popova acknowledges support from Russian Science Foundation Grant No. 19-18-00262.


  1. Aaberge, R., and A.B. Atkinson. 2010. Top incomes in Norway. In Top incomes: Global perspective, ed. A.B. Atkinson and T. Piketty, 448–481. Oxford: Oxford University Press.Google Scholar
  2. Abadie, A., A. Diamond, and J. Hainmueller. 2010. Synthetic control methods for comparative case studies: Estimating the effect of California tobacco control program. Journal of the American Statistical Association 105(490): 493–505.CrossRefGoogle Scholar
  3. Acemoglu, D., S. Naidu, P. Restrepo, and J.A. Robinson. 2019. Democracy does cause growth. Journal of Political Economy 127(1): 47–100.CrossRefGoogle Scholar
  4. Acemoglu, D., and J.A. Robinson. 2006. The economic origins of dictatorship and democracy. Cambridge: Cambridge University Press.Google Scholar
  5. Acemoglu, D., and J.A. Robinson. 2008. Persistence of power, elites, and institutions. American Economic Review 98(1): 267–293.CrossRefGoogle Scholar
  6. Alesina, A., and E. La Ferrara. 2005. Preferences for redistribution in the land of opportunities. Journal of Public Economics 89(5–6): 897–931.CrossRefGoogle Scholar
  7. Allcott, H., and D. Keniston. 2017. Dutch disease or agglomeration? The local economic effects of natural resource booms in modern America. The Review of Economic Studies 85(2): 695–731.CrossRefGoogle Scholar
  8. Alvaredo, F., A.B. Atkinson, T. Piketty, and E. Saez. 2013. The top 1 percent in international and historical perspective. Journal of Economic Perspectives 27: 3–20.CrossRefGoogle Scholar
  9. Álvarez, R., and J.R. Fuentes. 2012. Specialization dynamics and natural resources abundance. Review of World Economics 148(4): 733–750.CrossRefGoogle Scholar
  10. Andersen, J.J., and S. Aslaksen. 2008. Constitutions and the resource curse. Journal of Development Economics 87(2): 227–246.CrossRefGoogle Scholar
  11. Asiedu, E., and D. Lien. 2011. Democracy, foreign direct investment and natural resources. Journal of International Economics 84(1): 99–111.CrossRefGoogle Scholar
  12. Aslaksen, S. 2010. Oil and democracy: More than a cross-country correlation? Journal of Peace Research 47(4): 421–431.CrossRefGoogle Scholar
  13. Aslaksen, S., and R. Torvik. 2006. A theory of civil conflict and democracy in rentier states. Scandinavian Journal of Economics 108(4): 571–585.CrossRefGoogle Scholar
  14. Atkinson, A.B., and A. Brandolini. 2009. On data: A case study of the evolution of income inequality across time and across countries. Cambridge Journal of Economics 33: 381–404.CrossRefGoogle Scholar
  15. Atkinson, A.B., and A. Brandolini. 2001. Promise and pitfalls in the use of “secondary” datasets: Income inequality in OECD countries as a case study. Journal of Economic Literature 39(3): 771–799.CrossRefGoogle Scholar
  16. Atkinson, A.B., and J. Micklewright. 1992. Economic transformation in Eastern Europe and the distribution of income. Cambridge: Cambridge University Press.Google Scholar
  17. Atkinson, A.B., and J.E. Søgaard. 2016. The long-run history of income inequality in Denmark. The Scandinavian Journal of Economics 118(2): 264–291.CrossRefGoogle Scholar
  18. Atkinson, G., and K. Hamilton. 2003. Savings, growth and the resource curse hypothesis. World Development 31(11): 1793–1807.CrossRefGoogle Scholar
  19. Auty, R.M. 2000. How natural resources affect economic development. Development Policy Review 18(4): 347–364.CrossRefGoogle Scholar
  20. Auty, R.M. 2001. The political economy of resource-driven growth. European Economic Review 45(4–6): 839–846.CrossRefGoogle Scholar
  21. Avalos, N., V.G. Stuva, A. Heal, K. Lida, and N. Okazoe. 2015. Papua New Guinea and the natural resource curse. Comparative Economic Studies 57(2): 345–360.CrossRefGoogle Scholar
  22. Balcázar, C.F. 2016. Long-run effects of democracy on income inequality in Latin America. The Journal of Economic Inequality 14(3): 289–307.CrossRefGoogle Scholar
  23. Barro, R.J. 1999. Determinants of democracy. Journal of Political Economy 107(S6): S158–S183.CrossRefGoogle Scholar
  24. Besley, T., and M. Kudamatsu. 2008. Making autocracy work. In Institutions and economic performance, ed. E. Helpman, 452–510. Cambridge, MA: Harvard University Press.Google Scholar
  25. Bhattacharyya, S., L. Conradie, and R. Arezki. 2017. Resource discovery and the politics of fiscal decentralization. Journal of Comparative Economics 45: 366–382.CrossRefGoogle Scholar
  26. Bhattacharyya, S., and R. Hodler. 2010. Natural resources, democracy and corruption. European Economic Review 54(4): 608–621.CrossRefGoogle Scholar
  27. Bircan, C., T. Brück, and M. Vothknecht. 2017. Violent conflict and inequality. Oxford Development Studies 45(2): 125–144.CrossRefGoogle Scholar
  28. Boix, C. 2003. Democracy and redistribution. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  29. Boschini, A.D., J. Pettersson, and J. Roine. 2007. Resource curse or not: A question of appropriability. Scandinavian Journal of Economics 109(3): 593–617.CrossRefGoogle Scholar
  30. Brunnschweiler, C.N. 2008. Cursing the blessings? Natural resource abundance, institutions, and economic growth. World Development 36(3): 399–419.CrossRefGoogle Scholar
  31. Brunnschweiler, C.N., and E.H. Bulte. 2008. The resource curse revisited and revised: A tale of paradoxes and red herrings. Journal of Environmental Economics and Management 55(3): 248–264.CrossRefGoogle Scholar
  32. Bulte, E., and R. Damania. 2008. Resources for sale: Corruption, democracy and the natural resource curse. The BE Journal of Economic Analysis and Policy, 8(1).
  33. Cabrales, A., and E. Hauk. 2011. The quality of political institutions and the curse of natural resources. The Economic Journal 121(551): 58–88.CrossRefGoogle Scholar
  34. Campos, N., and J. Nugent. 2012. The dynamics of the regulation of labor in developing and developed countries since 1960. IZA DP no. 6881.Google Scholar
  35. Caselli, F., and G. Michaels. 2013. Do oil windfalls improve living standards? Evidence from Brazil. American Economic Journal: Applied Economics 5(1): 208–238.Google Scholar
  36. Cavalcanti, T., D. Da Mata, and F. Toscani. 2019. Winning the oil lottery: The impact of natural resource extraction on growth. Journal of Economic Growth 24(1): 79–115.CrossRefGoogle Scholar
  37. Cavallo, E., S. Galiani, I. Noy, and J. Pantano. 2013. Catastrophic natural disasters and economic growth. Review of Economics and Statistics 95(5): 1549–1561.CrossRefGoogle Scholar
  38. Chong, A., and C. Calderon. 2000. Institutional quality and income distribution. Economic Development and Cultural Change 48(4): 761–786.CrossRefGoogle Scholar
  39. Chong, A., and M. Gradstein. 2007. Inequality and institutions. The Review of Economics and Statistics 89(3): 454–465.CrossRefGoogle Scholar
  40. Claessens, S., and E. Perotti. 2007. Finance and inequality: Channels and evidence. Journal of Comparative Economics 35(4): 748–773.CrossRefGoogle Scholar
  41. Cockx, L., and N. Francken. 2016. Natural resources: A curse on education spending? Energy Policy 92: 394–408.CrossRefGoogle Scholar
  42. Collier, P., and A. Hoeffler. 2009. Testing the neocon agenda: democracy in resource-rich societies. European Economic Review 53(3): 293–308.CrossRefGoogle Scholar
  43. Comin, D. A., and B. Hobijn. 2009. The CHAT Dataset. NBER WP no. 15319.Google Scholar
  44. Dabla-Norris, E., K. Kochhar, N. Suphaphiphat, F. Ricka, and E. Tsounta. 2015. Causes and consequences of income inequality: A global perspective. International monetary fund discussion note, SDN/15/13.Google Scholar
  45. De Meere, J.M.M. 1983. Long-term trends in income and wealth inequality in the Netherlands 1808–1940. Historical Social Research 27: 8–37.Google Scholar
  46. Eberhardt, M. 2019. Democracy does cause growth: Comment. CEPR discussion paper 13659.Google Scholar
  47. Eduful, A., and M. Hooper. 2015. Urban impacts of resource booms: The emergence of oil-led gentrification in Sekondi-Takoradi. Ghana. Urban Forum 26(3): 283–302.CrossRefGoogle Scholar
  48. Fum, R.M., and R. Hodler. 2010. Natural resources and income inequality: The role of ethnic divisions. Economics Letters 107(3): 360–363.CrossRefGoogle Scholar
  49. Gallego, F.A. 2010. Historical origins of schooling: The role of democracy and political decentralization. The Review of Economics and Statistics 92(2): 228–243.CrossRefGoogle Scholar
  50. Gerring, J., S.C. Thacker, and R. Alfaro. 2012. Democracy and human development. The Journal of Politics 74(1): 1–17.CrossRefGoogle Scholar
  51. Giuliano, P., P. Mishra, and A. Spilimbergo. 2019. Democracy and reforms: Evidence from a new dataset. American Economic Journal: Macroeconomics 5(4): 179–204.Google Scholar
  52. Goderis, B., and S.W. Malone. 2011. Natural resource booms and inequality: Theory and evidence. Scandinavian Journal of Economics 113(2): 388–417.CrossRefGoogle Scholar
  53. Gradstein, M., and B. Milanovic. 2004. Does liberté = égalité? A survey of the empirical links between democracy and inequality with some evidence on the transition economies. Journal of Economic Surveys 18(4): 515–537.CrossRefGoogle Scholar
  54. Gupta, S., H. Davoodi, and R. Alonso-Terme. 2002. Does corruption affect income inequality and poverty? Economics of Governance 3(1): 23–45.CrossRefGoogle Scholar
  55. Gylfason, T. 2001. Natural resources, education, and economic development. European Economic Review 45(4–6): 847–859.CrossRefGoogle Scholar
  56. Gylfason, T., and G. Zoega. 2003. Inequality and economic growth: Do natural resources matter? In Inequality and growth: Theory and policy implications, ed. T.S. Eicher and S.J. Turnovsky, 255–292. Cambridge, MA: MIT Press.Google Scholar
  57. Haber, S., and V. Menaldo. 2011. Do natural resources fuel authoritarianism? A reappraisal of the resource curse. American Political Science Review 105(1): 1–26.CrossRefGoogle Scholar
  58. Havranek, T., R. Horvath, and A. Zeynalov. 2016. Natural resources and economic growth: A meta-analysis. World Development 88(C): 134–151.CrossRefGoogle Scholar
  59. Hartwell, C.A. 2016. The institutional basis of efficiency in resource-rich countries. Economic Systems 40(4): 519–538.CrossRefGoogle Scholar
  60. Hartwell, C. A., R. Horvath, E. Horvathova, and O. Popova. 2019. Natural resources and income inequality in developed countries: Synthetic control method evidence. IOS working paper 381.Google Scholar
  61. Huber, E., and J. Stephens. 2012. Democracy and the left: Social policy and inequality in Latin America. Chicago: University of Chicago Press.CrossRefGoogle Scholar
  62. Isham, J., M. Woolcock, L. Pritchett, and G. Busby. 2005. The varieties of resource experience: Natural resource export structures and the political economy of economic growth. The World Bank Economic Review 19(2): 141–174.CrossRefGoogle Scholar
  63. Islam, M.N. 2016. Does democracy reduce income inequality? Empirical Economics 51(4): 1299–1318.CrossRefGoogle Scholar
  64. Jenkins, S.P. 2015. World income inequality databases: An assessment of WIID and SWIID. Journal of Economic Inequality 13: 629–671.CrossRefGoogle Scholar
  65. Kolstad, I. 2009. The resource curse: Which institutions matter? Applied Economics Letters 16(4): 439–442.CrossRefGoogle Scholar
  66. Knutsen, C.H. 2015. Reinvestigating the reciprocal relationship between democracy and income inequality. Review of Economics and Institutions 6(2): 37.CrossRefGoogle Scholar
  67. Kyriacou, A.P. 2013. Ethnic group inequalities and governance: Evidence from developing countries. Kyklos 66(1): 78–101.CrossRefGoogle Scholar
  68. Lake, D.A., and M.A. Baum. 2001. The invisible hand of democracy: Political control and the provision of public services. Comparative Political Studies 34(6): 587–621.CrossRefGoogle Scholar
  69. Leamer, E.E., H. Maul, S. Rodriguez, and P.K. Schott. 1999. Does natural resource abundance increase Latin American income inequality? Journal of Development Economics 59(1): 3–42.CrossRefGoogle Scholar
  70. Libman, A. 2013. Natural resources and sub-national economic performance: Does sub-national democracy matter? Energy Economics 37: 82–99.CrossRefGoogle Scholar
  71. Mavrotas, G., S.M. Murshed, and S. Torres. 2011. Natural resource dependence and economic performance in the 1970–2000 period. Review of Development Economics 15(1): 124–138.CrossRefGoogle Scholar
  72. Mehlum, H., K. Moene, and R. Torvik. 2006. Institutions and the resource curse. The Economic Journal 116(508): 1–20.CrossRefGoogle Scholar
  73. Meltzer, A.H., and S.F. Richard. 1981. A rational theory of the size of government. Journal of Political Economy 89(5): 914–927.CrossRefGoogle Scholar
  74. Milanovic, B. 2016. Global inequality. Cambridge: Harvard University Press.CrossRefGoogle Scholar
  75. Muller, E.N. 1988. Democracy, economic development, and income inequality. American Sociological Review 53(1): 50–68.CrossRefGoogle Scholar
  76. Nunez-Rocha, T., and C. Turcu. 2019. Trade in Fuels and Environmental Regulation: A Two-Sided Story. Comparative Economic Studies 61(2): 302–343.CrossRefGoogle Scholar
  77. Parcero, O.J., and E. Papyrakis. 2016. Income inequality and the oil resource curse. Resource and Energy Economics 45: 159–177.CrossRefGoogle Scholar
  78. Pastor, L., and P. Veronesi. 2016. Income inequality and asset prices under redistributive taxation. Journal of Monetary Economics 81: 1–20.CrossRefGoogle Scholar
  79. Pomfret, R. 2011. Exploiting energy and mineral resources in Central Asia, Azerbaijan and Mongolia. Comparative Economic Studies 53(1): 5–33.CrossRefGoogle Scholar
  80. Powell, J., and C. Thyne. 2011. Global instances of coups from 1950 to 2010: A new dataset. Journal of Peace Research 48(2): 249–259.CrossRefGoogle Scholar
  81. Piketty, T., E. Saez, and S. Stantcheva. 2014. Optimal taxation of top labor incomes: A tale of three elasticities. American Economic Journal: Economic Policy 6(1): 230–271.Google Scholar
  82. Rånge, M., and M. Sandberg. 2017. Political Institutions and Regimes since 1600: A New Historical Data Set. Journal of Interdisciplinary History 47(4): 495–520.CrossRefGoogle Scholar
  83. Robinson, J.A., R. Torvik, and T. Verdier. 2006. Political foundations of the resource curse. Journal of Development Economics 79(2): 447–468.CrossRefGoogle Scholar
  84. Rodrik, D. 1999. Democracies pay higher wages. The Quarterly Journal of Economics 114(3): 707–738.CrossRefGoogle Scholar
  85. Roine, J., J. Vlachos, and D. Waldestrom. 2009. The long-run determinants of inequality: What can we learn from top income data? Journal of Public Economics 93: 974–988.CrossRefGoogle Scholar
  86. Ross, M.L. 1999. The political economy of the resource curse. World Politics 51(2): 297–322.CrossRefGoogle Scholar
  87. Ross, M.L. 2001. Does oil hinder democracy? World Politics 53: 325–361.CrossRefGoogle Scholar
  88. Ross, M.L. 2006. Is democracy good for the poor? American Journal of Political Science 50(4): 860–874.CrossRefGoogle Scholar
  89. Sachs, J.D., and A.M. Warner. 2001. The curse of natural resources. European economic review 45(4–6): 827–838.CrossRefGoogle Scholar
  90. Saint Paul, G., and T. Verdier. 1996. Inequality, redistribution and growth: A challenge to the conventional political economy approach. European Economic Review 3(40): 719–728.CrossRefGoogle Scholar
  91. Sarmidi, T., S. Hook Law, and Y. Jafari. 2014. Resource curse: New evidence on the role of institutions. International Economic Journal 28(1): 191–206.CrossRefGoogle Scholar
  92. Scheidel, W. 2017. The Great Leveler: Violence and the history of inequality from the stone age to the twenty-first century. Princeton: Princeton University Press.CrossRefGoogle Scholar
  93. Smith, B. 2015. The resource curse exorcised: Evidence from a panel of countries. Journal of Development Economics 116: 57–73.CrossRefGoogle Scholar
  94. Solt, F. 2016. The standardized world income inequality database. Social Science Quarterly 97(5): 1267–1281.CrossRefGoogle Scholar
  95. Solt, F. 2015. On the assessment and use of cross-national income inequality datasets. Journal of Economic Inequality 13: 683–691.CrossRefGoogle Scholar
  96. Soltow, L., and J.L. van Zanden. 1998. Income and Wealth Inequality in the Netherlands, 16th–20th Century. Amsterdam: Het Spinhuis.Google Scholar
  97. Spilimbergo, A., J.L. Londoño, and M. Székely. 1999. Income distribution, factor endowments, and trade openness. Journal of Development Economics 59(1): 77–101.CrossRefGoogle Scholar
  98. Timmons, J.F. 2010. Does democracy reduce economic inequality? British Journal of Political Science 40(4): 741–757.CrossRefGoogle Scholar
  99. Tridico, P. 2018. The determinants of income inequality in OECD countries. Cambridge Journal of Economics 42(4): 1009–1042.CrossRefGoogle Scholar
  100. Tsui, K.K. 2011. More oil, less democracy: Evidence from worldwide crude oil discoveries. Economic Journal 121(551): 89–115.CrossRefGoogle Scholar
  101. Uslaner, E. 2009. The moral foundations of trust. Cambridge: Cambridge University Press.Google Scholar
  102. Van der Ploeg, F. 2011. Natural resources: curse or blessing? Journal of Economic Literature 49(2): 366–420.CrossRefGoogle Scholar
  103. Van Bavel, B., and E. Frankema. 2017. Wealth inequality in the Netherlands, c. 1950–2015. The Paradox of a Northern European Welfare State. TSEG/Low Countries Journal of Social and Economic History 14(2): 29–62.Google Scholar
  104. Wiig, A., and I. Kolstad. 2012. If diversification is good, why don’t countries diversify more? The political economy of diversification in resource-rich countries. Energy Policy 40: 196–203.CrossRefGoogle Scholar

Copyright information

© Association for Comparative Economic Studies 2019

Authors and Affiliations

  1. 1.Bournemouth UniversityPooleUK
  2. 2.Kozminski UniversityWarsawPoland
  3. 3.Charles UniversityPragueCzech Republic
  4. 4.Global Change Research InstituteCzech Academy of SciencesPragueCzech Republic
  5. 5.Leibniz Institute for East and Southeast European Studies (IOS)RegensburgGermany
  6. 6.CERGE-EIPragueCzech Republic
  7. 7.Graduate School of Economics and ManagementUral Federal UniversityYekaterinburgRussian Federation

Personalised recommendations